(Reuters) – Futures tracking the Nasdaq index rose sharply on Thursday, driven by gains in major technology stocks, as investors remained little changed in their expectations that the Federal Reserve will cut interest rates in September, despite forecasts of just one rate cut this year.
Investor sentiment improved on weaker-than-expected inflation data and Federal Reserve Chairman Powell's recognition that progress is being made in tackling price pressures.
The market has become less betting that rate cuts will begin in September, but still sees a 60% or higher probability of a cut, according to CME's FedWatch tool. Rate traders are pricing in nearly two 25-basis-point cuts, according to LSEG data.
“Ultimately, whether there is one or two cuts this year is less important than the overall direction of policy rates. The FOMC remains fully data-dependent but recognises that policy must stop tightening before it has a detrimental effect on the economy,” said Paolo Zanghieri, senior economist at Generali Investments.
“I don't think this meeting will rule out the expectation of two rate cuts this year,” Zangieri said.
Benchmark Treasury yields fell on Wednesday, causing the S&P 500 and Nasdaq to pare early gains but still close at record highs.
The producer price index and weekly jobless claims for May are due to be released before the market opens on Thursday, and New York Fed President John Williams is scheduled to moderate a panel discussion later in the day.
Tech stocks continued to rally in premarket trading, with Broadcom shares soaring 13.5% after the company raised its artificial intelligence chip sales forecast and announced a 10-for-1 stock split.
Peer Nvidia rose 2.1%, while shares of other big names Amazon, Meta Platforms and Alphabet fell between 0.4% and 0.6%.
Strong gains in several large technology stocks and hopes of a soft landing for the economy have been the main drivers of the S&P 500 and Nasdaq's strong performance this year.
S&P 500 futures rose on Thursday, while Dow futures fell after the index finished nearly flat in the previous trading day.
Futures for the Russell 2000 index of economically sensitive small-cap stocks also fell 0.5% after the index hit a one-month high on Wednesday.
Apple's shares rose 0.2% and, if they continue to rise, are on track to reclaim the title of the world's most valuable company from Microsoft.
As of 5:40 a.m. ET, the Dow e-mini was down 119 points, or 0.31%, while the S&P 500 e-mini was up 2.75 points, or 0.05%, and the Nasdaq 100 e-mini was up 100.25 points, or 0.51%.
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Meanwhile, Tesla shares rose 5% after Elon Musk said the company's shareholders approved his $56 billion compensation package and voted to move the electric car maker's headquarters to Texas.
Virgin Galactic plunged 7.8% the day after it announced a 20-for-1 reverse stock split.
(Reporting by Lisa Matakkal in Bengaluru; Editing by Devika Shamnath)
