U.S. stocks are jumping Thursday and clawing back most of their losses for the week.
Falling oil prices and easing pressure from the bond market are helping Wall Street reverse many of its moves from the prior day, when the Federal Reserve hiked its main interest rate for the first time in years and suggested more may be ahead as it tries to get the nation’s high inflation under control.
The S&P 500 jumped one per cent and was on track for just its second rise in the last nine days. The Dow Jones Industrial Average was up 306 points, or 0.6 per cent, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 1.3 per cent higher.
Stocks got a boost after the price for a barrel of Brent crude oil slid three per cent to US$102.70. That’s down sharply from the nearly US$110 it reached earlier in the week on worries that the war with Iran will keep oil bottled up in the Middle East instead of going to customers worldwide.
Brent is of course still much more expensive than the US$72 per barrel that it cost earlier this summer, but Thursday’s slide helped pull yields lower in the bond market and removed some pressure on stocks. The yield on the 10-year Treasury fell to 4.95 per cent from 5.01 per cent late Wednesday.
Higher yields make it more expensive for everyone to borrow money, from the U.S. government to people looking to buy houses to businesses wanting to build data centers. That in turn slows the economy.
The Fed on Wednesday raised the short-term interest rate that it controls, the federal funds rate, by a quarter of a percentage point for its first hike in more than three years. Officials also indicated at least one more increase may be coming this year and that the Fed may then keep the federal funds rate high through next year.
The signals sent Wall Street on a roller coaster. Stocks initially held onto their earlier gains Wednesday but then slid sharply before recovering a chunk of the losses before trading ended for the day.
On the upside for markets, the shift to higher interest rates built confidence that the Fed is committed to getting inflation back to its target of two per cent. Questions had begun to bubble in the summer about whether the Fed would feel pressure from President Donald Trump, who has been calling for lower interest rates. And the short-term cost of pain for the economy could be worth it if it gets inflation under control following years of staying too high.
On the downside for markets, higher rates would undercut prices for stocks and other investments. When investors are making more in interest from owning bonds, which are considered safer investments, they’re less willing to pay high prices for other kinds of investments. That’s beyond the effect higher rates have in slowing the economy in hopes of removing fuel for further acceleration of inflation.
Some reports on Thursday signaled the U.S. economy may be strong enough to withstand higher interest rates. One said fewer U.S. workers applied for unemployment benefits last week, the latest sign that the job market remains solid. Another said that manufacturing growth in the mid-Atlantic region was stronger than economists expected.
U.S. Fed Chairman Kevin Warsh said on Wednesday that a strengthening economy is one of the reasons Fed officials moved to raise interest rates after keeping them on hold through this year.
He also cited “geopolitics,” along with the threat that the increases in prices it’s causing could push up inflation elsewhere. That’s likely a nod to the war with Iran and its effect on oil prices.
On Wall Street, stocks in the artificial-intelligence industry continued to rebound following their worldwide slide on Monday after leaders of the AI industry called for a slowdown in development to address safety issues for humanity.
Nvidia climbed 1.8 per cent, and Advanced Micro Devices rose 3.6 per cent. That was even though OpenAI disclosed six more reports of “unexpected or concerning” behavior in AI models.
Stocks of several homebuilders also rose, even though a report showed the industry broke ground on fewer new homes last month than economists expected. The housing industry has been one of the hardest hit by the climb for the 10-year Treasury’s yield, which topped 5 per cent this week for the first time since 2023 and has sent mortgage rates higher.
Thursday’s ease in yields helped offer some support, and D.R. Horton rose 0.8 per cent, while PulteGroup added 0.6 per cent. Rival Lennar fell 0.9 per cent after reporting weaker profit and revenue for the latest quarter than analysts expected.
In stock markets abroad, indexes rose across much of Europe following a weaker finish in Asia.
London’s FTSE 100 rose 0.8 per cent after the Bank of England decided to keep its interest rates on hold.
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Stan Choe, The Associated Press
AP Business Writers Chan Ho-him and Michelle Chapman contributed to this report.
