Stock Futures Rebound, Bonds Pare Losses After Fed: Markets Wrap

(Bloomberg) — Stock-index futures rebounded and Treasuries pared losses as Federal Reserve Chair Kevin Warsh’s resolve to tackle inflation reassured markets following the central bank’s first interest-rate hike since 2023.

Futures for the S&P 500 Index rose 0.6% after the underlying gauge fell Wednesday to its lowest since July as the Fed raised rates. European shares were also set to advance, while contracts for the tech-heavy Nasdaq 100 Index climbed 0.7%. A gauge of Asian equities gained 0.3%.

Meanwhile, the yield on the rate-sensitive two-year US note fell two basis points to 4.71% after climbing to the highest since 2024 in the prior session following the Fed move. Yields on the 10-year and 30-year bonds both dropped by two basis points. Asian debt reversed earlier losses and tracked Treasuries higher.

A Bloomberg gauge of the dollar’s strength held its gains from the previous session, when it rose to the highest in more than a month. The move followed a hawkish message from Warsh, who said the rate increase “removed a dose of accommodation.” Money markets priced in more than a 50% chance of another Fed hike in October.

“I see this as a credibility relief trade rather than a Goldilocks one,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Warsh reinforced the Fed’s inflation-fighting credentials, and you can see that in the stronger dollar, while importantly the long end of the Treasury curve did not move disorderly higher.”

Markets are still acknowledging some growth risk from tighter policy, she said. But the relatively contained long-end reaction, resilience in tech and calmer tone across Asian markets suggest “investors are relieved that a more hawkish Fed has not translated into another shock in long-term yields.”

The Federal Open Market Committee voted unanimously to lift the benchmark rate by a quarter percentage point to a range of 3.75% to 4%.

“Markets appear to be taking comfort from the fact that the Fed is tightening into an economy that remains relatively resilient, rather than one that is already showing significant signs of deterioration,” said Gerald Gan, chief investment officer at Reed Capital Partners.

Attention now turns to the policy decision in the UK, where the Bank of England is expected to hold rates on Thursday. On Friday, the Bank of Japan is expected to lift rates.

In other corners of the market, Brent held its losses from the prior session when it retreated on signs that some recent Middle East supply disruptions are easing.

Brent traded around $105.75 a barrel after falling as much as 5% on Wednesday as Saudi Arabia sought to restore about half the capacity of its East-West pipeline within days after drone strikes forced its closure last week. Also, President Trump said the Iran war will end “very soon.”

Gold rebounded after three days of losses to about $4,290 an ounce.

Warsh reinforced the inflation-fighting message he delivered at Jackson Hole last month. Speaking to reporters Wednesday, he said too many categories of goods and services were showing annualized price gains above 3% over six- and 12-month periods.

President Donald Trump said on social media after the decision that US interest rates should be at 1% or lower, though he stopped short of directly criticizing Warsh.

Wednesday’s move may mark the start of a broader tightening cycle, with both policymakers and traders anticipating at least one more increase this year. Attention is now shifting to the timing and pace of further moves.

“History is clear that once the Fed begins raising rates, they do it multiple times,” said Chris Zaccarelli, chief investment officer at Northlight Asset Management. “But the pattern is less clear about whether they will raise rates at consecutive meetings or leave rates unchanged” at some of them.

Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.6% as of 1:50 p.m. Tokyo time Japan’s Topix rose 0.7% Australia’s S&P/ASX 200 rose 0.3% Hong Kong’s Hang Seng fell 0.7% The Shanghai Composite fell 0.4% Euro Stoxx 50 futures rose 0.6% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was unchanged at $1.1465 The Japanese yen rose 0.2% to 156.02 per dollar The offshore yuan was little changed at 6.7082 per dollar Cryptocurrencies

Bitcoin rose 0.4% to $76,418.01 Ether rose 1.2% to $2,439.03 Bonds

The yield on 10-year Treasuries declined two basis points to 5.00% Japan’s 10-year yield was unchanged at 3.000% Australia’s 10-year yield declined three basis points to 5.32% Commodities

West Texas Intermediate crude fell 0.3% to $102.14 a barrel Spot gold rose 0.8% to $4,296.23 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Momoka Yokoyama.

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