US Stock Futures Rally as Markets Digest Fed Rate Hike

U.S. stock futures climbed sharply on Thursday as investors reassessed the Federal Reserve’s first interest rate increase in more than three years and Treasury yields retreated from recent highs.

S&P 500 and Dow Jones futures advanced 1.3% each by 08:57 ET, while Nasdaq 100 futures jumped 1.6%. The rebound followed losses on Wall Street Wednesday after the Fed raised its benchmark rate by 25 basis points and signaled that another increase could come before year-end.

Fed Chair Kevin Warsh initially unsettled markets with comments emphasizing persistent inflation risks. Analysts at Vital Knowledge described his post-meeting remarks as “net hawkish,” reinforcing expectations that monetary policy could tighten further.

However, falling U.S. Treasury yields helped improve market sentiment Thursday. The benchmark 10-year yield declined after touching its highest level in nearly two decades earlier this week, while the rate-sensitive two-year yield also eased.

Investors also focused on changes to the Fed’s policy statement. Officials removed previous language attributing stubborn inflation partly to supply shocks and sector-specific price increases, instead describing inflation simply as “elevated.”

Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said the shift underscores the Fed’s commitment to its inflation target. Warsh also stressed the need to prevent price increases in specific sectors from spreading more broadly through the economy.

Markets are now pricing in roughly a 51% probability of another Fed rate hike in October, compared with 44% a day earlier, according to CME FedWatch data. President Donald Trump criticized the latest decision, saying interest rates remained too high.

Elsewhere, oil prices declined for a second straight session amid hopes Saudi Arabian exports could recover, although Middle East tensions kept Brent crude above $100 per barrel.

Among individual stocks, Snap gained in premarket trading after announcing an enterprise augmented reality glasses partnership with Nvidia, Amazon and Salesforce. Generac also surged after Amazon received warrants to purchase up to $340 million of its shares as part of a power supply agreement.