Stocks climbed Thursday morning as Wall Street tried to bounce back from a steep sell-off the previous day, after the Federal Reserve issued its first interest-rate hike in three years.
The Dow Jones Industrial Average jumped 305 points, or 0.6%, by about 9:40 a.m. ET, while the S&P 500 and Nasdaq rose 1% and 1.3%, respectively.
Long-term Treasury yields eased slightly after the Fed decision, following a rapid run-up over the past few weeks as traders feared officials were waiting too long to act on inflation. The US 10-year Treasury yield dipped to 4.951%, while the 30-year yield eased to 5.309%.
Bob Edwards, chief investment officer at Edwards Asset Management, said stocks are rising and Treasury yields are easing because the Fed’s meeting cleared up some uncertainty.
“Stocks have the clarity needed from the Federal Reserve to resume their rally as the market’s wall of worry continues,” he said in a Thursday note.
“Wednesday’s rate hike was already priced into the markets since bond yields have been rising and stocks have been declining in recent weeks.”
Oil prices dipped on Thursday, though they still remained near the $100 level. Brent crude oil prices fell 2.6% to $103.30 a barrel while West Texas Intermediate slid 1.8% to $100.55 a barrel.
Investors had largely been expecting the Fed to hike interest rates by a quarter point in an attempt to tackle stubborn inflation. But the Fed rarely issues standalone rate movements, and the real market mover was its forecast for more rate hikes this year.
On Wednesday, the Dow fell more than 630 points, or 1.2%, while the S&P 500 dropped 0.5%. The Nasdaq ended the session just slightly in the red.
The committee’s dot plot showed 12 of 18 officials expect one more rate hike this year and four anticipate two more rate hikes. Just two predicted no more rate hikes.
Economists have warned that higher interest rates could raise borrowing costs on mortgages, auto loans and credit cards – hitting consumers who are already struggling with a tight housing market and sky-high gasoline prices.
Most analysts expect the second rate hike to come in December, not at the Fed’s next meeting in October – which is just days before the November midterm elections and could invite blowback from President Trump, who is trying to tackle affordability concerns.
Trump on Wednesday night decried the rate hike, though he notably refrained from attacking Warsh personally — blaming the Fed board, instead.
“I’m relying on Kevin, but he’s got a very tough board,” the president told reporters.
“I talked to Kevin and I said, ‘You might as well vote with the board because it’s not going to matter.’”
He reiterated longstanding calls for rate cuts, posting earlier on Truth Social: “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR.”
So far in September, consumer sentiment has dropped to 47.8, down from 51.7 the previous month and near the historic lows reached earlier this year amid the Iran war, according to a monthly survey the University of Michigan released last week.
During a Wednesday press conference, Fed Chair Kevin Warsh addressed the impact of rate hikes on lower-income Americans already facing a high cost of living.
“Those who are least well off have the most to gain from a durable expansion, a solid labor market and stable prices,” he said.
Meanwhile, analysts have warned that the Fed’s new stance against forward guidance – which has been led by Warsh – could lead to more stock market volatility ahead of future meetings.