U.S. stocks climbed on Thursday, recovering from a Federal Reserve-induced sell-off as retreating crude prices and lower Treasury yields eased market pressures. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all advanced following the central bank’s rate hike.
Wall Street clawed back significant ground as falling commodity costs and a cooling bond market offered a brief reprieve to investors. The rebound came after major U.S. stock indexes jumped, attempting to reverse heavy losses triggered just a day earlier by the Federal Reserve’s decision to raise interest rates.
U.S. equities climbed on Thursday, supported by a drop in Treasury yields and oil prices as well as gains in key technology stocks, with traders trying to claw back some of the prior day’s losses incited by the first Federal Reserve interest rate hike in more than three years. U.S. stocks are rising Thursday and recovering most of their losses for the week.
The major US stock indexes jumped on Thursday as retreating oil prices improved market sentiment, with the Federal Reserve’s first interest-rate hike under Chair Kevin Warsh underscoring the central bank’s commitment to managing inflation. The policy decision, which addressed a chronic source of unease, prompted investors to return to favored sectors. Falling oil prices and easing pressure from the bond market helped Wall Street reverse many of its moves from the prior day, when the Federal Reserve hiked its main interest rate for the first time in years and suggested more may be ahead as it tries to get the nation’s high inflation under control.
The gains will be crucial in the second half of September, historically a weak month for equities, with the benchmark S&P 500 (.SPX) losing 1.7% so far this month. The S&P 500 climbed 0.9% and was on track for just its second rise in the last nine days.
Federal Reserve Rate Hike and Market Volatility
The central bank raised the overnight federal funds rate by a quarter percentage point, bringing its target range to between 3.75% and 4% in the first interest rate hike in more than three years. Policymakers signaled that further monetary tightening may be required in the coming months as they try to get inflation under control. Officials also indicated at least one more increase may be coming this year and that the Fed may then keep the federal funds rate high through next year.
The Fed on Wednesday raised the short-term interest rate that it controls, the federal funds rate, by a quarter of a percentage point for its first hike in more than three years. Those moves came after the Fed raised the overnight federal funds rate by a quarter percentage point, bringing the target range to between 3.75% and 4%. Policymakers also signaled another hike could come this year, with Fed Chairman Kevin Warsh saying that inflation remains too high.
The signals sent Wall Street on a roller coaster. Stocks initially held onto their gains from earlier in the day after the Fed made its announcement Wednesday. They then slid sharply before recovering a chunk of the losses before trading ended for the day. On the upside for markets, the shift to higher interest rates built confidence that the Fed is committed to getting inflation back to its target of 2%. Questions had begun to bubble in the summer about whether it would feel pressure from President Donald Trump, who is calling for lower interest rates. And the short-term cost of pain for the economy could be worth it if it gets inflation under control.
For equities, the message is clear. The start of a hiking cycle can bring volatility, but volatility does not have to end a bull market,
said Brett Mitstifer, chief investment officer of private banking and wealth management at Flagstar Bank.
If this cycle remains measured, disciplined investors should view market dislocations as opportunities to upgrade quality, not reasons to abandon risk altogether, Mitstifer added
Oil Prices Slide and Treasury Yields Ease
Market sentiment found relief as energy markets retreated for a second straight day. Stocks got a boost after the price for a barrel of Brent crude oil slid 2.3% to $103.38. That’s down sharply from the nearly $110 it reached earlier in the week on worries that the war with Iran will keep oil bottled up in the Middle East instead of going to customers worldwide. Brent is of course still much more expensive than the $72 per barrel that it cost earlier this summer, but Thursday’s slide helped pull yields lower in the bond market and removed some pressure on stocks.
U.S. crude traded 1% lower, falling to around $100 per barrel. Brent slid 2% to about $103 a barrel. That’s as supply disruption concerns eased after Saudi Arabia reportedly decided to make more crude cargoes available to Asian refiners through ship-to-ship transfers near the Sohar port in Oman. Middle East conflict keeps oil-supply fears alive.
The relief in energy costs helped pull bond yields lower. The yield on the benchmark 10-year Treasury fell to 4.95% from 5.01% late Wednesday. The 10-year yield moved below 5%, dropping more than 5 basis points to 4.945%. The yield had risen back above that key level Wednesday following the Fed’s rate decision.
Higher yields make it more expensive for everyone to borrow money, from the U.S. government to people looking to buy houses to businesses wanting to build data centers. That in turn slows the economy. High yields on risk-free U.S. Treasuries typically dampen the appeal of stocks.
Technology and AI Stocks Lead the Recovery
Technology shares drove the broader market higher, with Nvidia (NVDA.O) and Amazon (AMZN.O) adding more than 2% each. Magnificent Seven
names Nvidia and Amazon rose 2% each, while fellow member Microsoft gained 1%. Other stocks related to the artificial intelligence trade such as Qualcomm and Intel advanced 2% and 9%, respectively.
Beyond tech, industrials offered momentum as well, with stocks like Caterpillar moving up more than 2%. Technology shares rose, with Nvidia and Amazon adding more than 2% each. Tech drove the broader market higher.
Sector Performance Across Wall Street
Major indexes posted broad gains during Thursday’s session. At 11:42 a.m. ET, the Dow Jones Industrial Average (.DJI) rose 316.52 points, or 0.61%, to 51,778.04, the S&P 500 (.SPX) gained 80.05 points, or 1.06%, to 7,631.86, and the Nasdaq Composite (.IXIC) was up 411.57 points, or 1.59%, to 26,390.96. The Dow Jones Industrial Average advanced 358 points, or 0.7%. The S&P 500 was up 1.1%, and the Nasdaq Composite added 1.6%. The Dow Jones Industrial Average was up 213 points, or 0.4%, as of 11 a.m. Eastern time, and the Nasdaq composite was 1.4% higher.
The small-cap Russell 2000 index (.RUT) added more than 1% to 2,891.45 despite its greater sensitivity to interest rates. US SEC tokenized trading exemption lifts crypto-linked stocks.
| Market Index | Point Change | Percentage Change |
|---|---|---|
| Dow Jones Industrial Average | +316.52 | +0.61% |
| S&P 500 | +80.05 | +1.06% |
| Nasdaq Composite | +411.57 | +1.59% |
| Russell 2000 | Not reported | +1% |
Analyst Outlook and Upcoming Central Bank Decisions
Market participants are weighing the trajectory of future monetary policy against incoming economic data. However, the Fed warned more hikes may be needed in the coming months to control prices. Uncertainty over how high interest rates could ultimately rise is likely to keep stocks and bonds volatile in the weeks ahead.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note on Thursday that his team remained positioned for further equity gains while preparing for near-term volatility.
If tightening remains measured, credit spreads remain stable, and profits continue to grow, the rally should have scope to broaden across sectors and regions, Haefele said
We recommend diversified equity exposure while avoiding excessive concentration in areas that are particularly sensitive to interest rates or rely on a single return driver,
he added.
Traders see a near 51% chance of another increase when the central bank meets next, in October, compared with about 44% a day ago, according to CME’s FedWatch.
