US equities rebounded on Thursday after a sell-off triggered by the Federal Reserve's first rate hike in three years, with the S&P 500 climbing 1.1% and the Nasdaq Composite jumping 1.7%. The recovery was driven by easing bond yields and lower oil prices, which helped investors process the central bank's hawkish stance on inflation.
The Dow Jones Industrial Average rose 0.6% as traders assessed the implications of the Fed's 25 basis point increase. Federal Reserve Chairman Kevin Warsh's rhetoric, which projected one additional rate hike this year, was cited by analysts as a factor in restoring confidence in the Fed's ability to contain prices. The move drew sharp criticism from President Donald Trump, who stated he had spoken with Warsh before the FOMC meeting, telling him that his vote would not matter given the board's likely outcome.
Energy markets provided a supportive backdrop for risk assets. Brent crude settled near $104 per barrel, down from higher levels as US Energy Secretary Chris Wright indicated that Saudi Arabia's East-West pipeline would be restored soon. This pipeline serves as a critical alternative route for oil previously stuck in the Strait of Hormuz. Wright noted that 18 million barrels of crude and products had passed through the Strait earlier in the week, with a seven-day average flow of 11 million barrels per day.
The Federal Reserve's decision comes amid persistent inflationary pressures that have complicated the economic outlook. Wall Street analysts estimate that a steep 5.9% jump in wireless phone bills from July to August contributed approximately 10 basis points to the core consumer price index rise that helped cement expectations for the rate hike. Despite the Fed's action, uncertainty remains regarding how tightly monetary policy will be held, which may continue to create volatility for rate-sensitive assets like small-cap stocks.
In related developments, the Bank of England voted to hold its benchmark lending rate steady at 3.75%. Governor Andrew Bailey warned that while global energy costs have had a limited effect on UK price setting so far, prolonged volatility could necessitate future rate increases to meet the 2% inflation target. Three members of the Monetary Policy Committee dissented, arguing for a 25 basis point hike.
Corporate news also reflected shifting dynamics in technology and infrastructure. Generac shares surged more than 18% after announcing a deal to provide up to $8 billion in backup generators for Amazon data centers, with initial deliveries expected to reach $2.4 billion in 2027 and 2028. Meanwhile, Lucid stock popped 11% following a partnership with Bolt to deploy at least 25,000 autonomous vehicles in Europe using Nvidia's Hyperion architecture.
Market strategists noted that while the Fed's independence appears reinforced, the path forward for rates remains unclear. Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments, suggested the Fed may have come off too hawkish, requiring careful monitoring of the economic reaction in coming months.