By Shristi Achar A and Johann M Cherian

Dec 14 (Reuters) – U.S. stock index futures gained on Thursday, a day after the Federal Reserve hinted an end to its recent aggressive rate hikes and signaled that borrowing costs would be lower next year.

The Fed left interest rates unchanged on Wednesday, as expected, with Chair Jerome Powell saying the historic tightening of monetary policy was likely over, as inflation falls faster than expected, and discussions on cuts in borrowing costs were coming “into view”.

The Fed had raised its policy rate by a market-punishing 525 basis points since March 2022 in an effort to curb decades-high inflation. On Wednesday, 17 of 19 Fed officials projected the policy rate would be lower by end-2024.

The dovish pivot in the central bank’s statement triggered a rally in equities on Wednesday and sent the Dow Jones Industrial Average Index .DJI to a record closing high.

“Continuing disinflationary pressures has offered the Fed room to maneuver. Further, there are signs that rate hikes are loosening the labor market,” said Emin Hajiyev, senior economist at Insight Investment.

“If the Fed can bring inflation down without these measures deteriorating much further, it strongly improves the central bank’s prospect of achieving a ‘soft landing’ and avoiding a recession.”

Money markets now see an 88.6% chance of at least a 25-basis-point rate cut in March 2024, up from about 50% before the policy decision, while fully pricing in another cut in May, according to CME Group’s FedWatch tool.

Treasury yields also fell to multi-month lows following Wednesday’s events, with the yield on the benchmark 10-year Treasury note US10YT=RR last standing at 3.9675%.US/

The falling yields further cushioned equities, with megacap stocks like Alphabet GOOGL.O, Tesla TSLA.O and Nvidia NVDA.O inching up between 0.8% and 1.0% before the bell.

Investors will now parse the retail sales data for November and the weekly jobless claims number, both due at 8:30 a.m. ET, for more clues on softening inflation.

At 7:01 a.m. ET, Dow e-minis 1YMcv1 were up 93 points, or 0.25%, S&P 500 e-minis EScv1 were up 12.75 points, or 0.27%, and Nasdaq 100 e-minis NQcv1 were up 59.5 points, or 0.35%.

AdobeADBE.O shed 4.5% after the Photoshop maker forecast annual and quarterly revenue below estimates.

ModernaMRNA.O advanced 6.1% after an experimental messenger RNA cancer vaccine it developed along with Merck MRK.N cut the chance of recurrence or death from melanoma by half after three years, when paired with Merck’s Keytruda.

Occidental PetroleumOXY.N added 2.0% after Warren Buffett’s Berkshire Hathaway BRKa.N acquired nearly 10.5 million shares of the oil giant for about $588.7 million.

Foot Locker FL.N rose 3.6% after Piper Sandler upgraded the sportswear retailer to “overweight” from “neutral”.

Stocks love the Fed again https://tmsnrt.rs/3v4nD2u

(Reporting by Shristi Achar A and Johann M Cherian in Bengaluru; Editing by Pooja Desai)

(([email protected] https://twitter.com/ShristiAchar;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Original: NVDA Feed: US STOCKS-Futures rise after Fed signals rate cuts are on the horizon