US stocks opened higher on Thursday as Wall Street shook off Wednesday’s selloff, with the Federal Reserve’s first interest rate hike since 2023 now behind investors.
The Dow Jones Industrial Average rose 311 points, the S&P 500 gained 1.2%, and the Nasdaq Composite climbed 1.59%.
Wednesday’s hike, and the market’s first reaction
The Fed raised its benchmark rate by 25 basis points to a target range of 3.75% to 4.00% on Wednesday, in a unanimous decision.
It marked the central bank’s first increase in three years.
Fed Chair Kevin Warsh struck a hawkish tone in his post-meeting remarks, saying inflation remained “too high” and that financial conditions were not yet restrictive enough.
The Fed’s updated dot plot showed 16 of 18 policymakers expect at least one more quarter-point hike before the end of 2026.
Stocks initially fell on the news.
The Dow dropped 1.21% Wednesday, weighed down by losses in financial services stocks, while the S&P 500 slid 0.45% and the Nasdaq Composite slipped a more modest 0.01%, giving up earlier gains.
Why stocks are rebounding
With the rate decision now behind them, investors returned Thursday to buying their preferred themes, particularly technology.
Alphabet and Meta both rose more than 1%.
Progress on a bill aimed at regulating data center power costs added further support to tech names.
Neocloud firms Nebius, IREN also gained at open.
Bond markets also calmed.
The 2-year Treasury yield, most sensitive to near-term Fed policy, fell 1 basis point to 4.72% Thursday, after touching its highest level since 2024 in the prior session.
The 10-year and 30-year yields each eased about 2 basis points.
Oil prices also fell sharply after Reuters reported that US officials held secret talks in Oman with Yemen’s Iran-aligned Houthi rebels, raising hopes for an easing in Middle East tensions that have kept energy prices elevated for months.
Not every stock is celebrating
Fluence Energy tumbled 19% after lowering its revenue forecast for fiscal year 2026.
Even with Thursday’s gains, the S&P 500 remains down 1.7% for the month so far, a reminder that the back half of September has historically been a weak stretch for equities.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, said Warsh had “threaded the needle very well” with Wednesday’s decision, but cautioned that inflation has now stayed above the Fed’s target for more than five years, a factor likely to keep policy debates alive.
The rate hike has also put Warsh at odds with President Donald Trump, who said in a social media post following the decision that interest rates should be at 1% or lower, later telling reporters that current rates were “not appropriate.”
That tension between the White House and the Fed is likely to remain a recurring theme as markets digest the prospect of further tightening later this year.
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