Investors appeared ready to move past the Fed meeting on Thursday, igniting a new stock rally a day after markets slipped following the first rate increase in three years.
Federal Reserve Chair Kevin Warsh’s hawkish commentary on inflation rattled markets, raising the prospect of further tightening after the Fed’s first rate hike since July 2023.
However, the trend turned around on Thursday as investors returned to equities while bond yields and oil prices eased.
Here’s how the major indexes were positioned around 10:15 a.m. ET:
Investors had been shaken by a more aggressive stance than anticipated. Markets now price in a possible December rate hike, with Warsh describing the economy as robust and characterizing the increase as stripping away a ‘dose of accommodation.’ True to his approach as Fed chair, he refrained from offering additional forward guidance.
‘Markets were hoping for clarity on rate hikes from the Fed on Wednesday, but instead we received more uncertainty — and that is the core reason why stocks (and bonds) fell after Fed Chair Warsh’s press conference,’ said Tom Essaye, founder of Sevens Report Research, in a Thursday client note.
But the anxiety eased on Thursday morning, as falling oil prices and declining bond yields buoyed investors.
Brent crude slipped 3% to roughly $102 after earlier testing $110 a barrel, while U.S. oil dropped 2% to $100.
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‘Now that we are past this rate hike, stocks can move forward as uncertainty has faded,’ said Bob Edwards, chief investment officer at Edwards Asset Management, in a Thursday email.
Edwards anticipates another hike in December and believes the Fed is unlikely to lift rates in October, given the proximity to the midterm elections.