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U.S. stocks rebounded on Thursday, shaking off some of the gloom from the previous day’s hawkish Federal Reserve meeting, which sent global stock markets reeling.
Wall Street’s S&P 500 index was up 0.8% by midday, but still below early levels that had propelled it up more than 1%. The major U.S. stock market barometer fell nearly 3% on Wednesday, the biggest drop since August.
“Every dip right now is a buying opportunity,” said Steve Sosnick, chief global strategist at Interactive Brokers. “You might say the selling is overdone, but seeing the market bounce back… just telling you, no matter what happens, For whatever reason, traders buy on dips.
The tech-heavy Nasdaq rose 1% after falling 3.6% on Wednesday. Six of the Big Seven tech giants — Apple, Microsoft, Alphabet, Amazon, Meta and Nvidia — made progress. However, Tesla shares fell 1% after falling 8% in the previous session.
“We have been very concerned about Trump [in recent weeks] “But now it seems like it’s back to a Jay Powell-style stock market,” Jeff Weniger, head of equity strategy at WisdomTree, said of the Fed chairman.
In the bond market, the benchmark 10-year Treasury bond yield rose another 0.05 percentage point to 4.55%, the highest level in more than six months, after rising sharply on Wednesday. The dollar gained a further 0.2% against a basket of currencies on Thursday, after surging to its highest level since November 2022 in the previous session.
The Federal Reserve cut interest rates by a quarter of a percentage point on Wednesday but rattled investors after raising its inflation forecast for 2025 and scaling back expectations for further rate cuts. This is the central bank’s last meeting before Trump takes office next month.
Fed officials forecast a rate cut of just half a percentage point in 2025, down from a full percentage point forecast in September, amid concerns about inflation stalling above 2%.
Akshay Singal, global head of short-term rates trading at Citigroup, said: “I think the market has priced in a rate cut from the Fed but will continue to give itself the option of further cuts next year.”
Instead, the Fed has made a significant U-turn and given itself more options to “keep interest rates on hold for some time” to absorb the impact of loose fiscal policy, he added, predicting that hawkish comments will continue to boost the dollar.
According to CME Group data based on federal funds futures, investors now believe that there is about an 85% chance that the Fed will either not cut interest rates next year or cut rates one or two times.
The Fed’s hawkish outlook rippled through European and Asian markets on Thursday. Europe’s benchmark Stoxx 600 fell 1.5% and Britain’s FTSE 100 fell 1.1%. Earlier, markets in India, Japan, South Korea and Hong Kong also closed lower.
Emerging market stocks also took a hit, with the MSCI Emerging Markets Index falling 1.1%.
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