US stock-index futures pointed to a positive open on Thursday, recovering from a selloff the prior session after the Federal Reserve delivered its first rate increase in three years.
At IG, the Dow Jones Industrial was indicating a gain of 1.3%, or roughly 670 points, at 52,120, a quarter-hour before the opening bell. The technology-heavy Nasdaq 100 futures were tracking an even steeper rise of 1.7%.
Investors initially absorbed the Fed's rate move on Wednesday, when the benchmark index first fell to its lowest level since mid-June. By nightfall, however, the resolve of Fed Chair Kevin Warsh to combat inflation appeared to win over markets. Analysts also noted that the central bank's continued independence from political pressure helped steady sentiment.
"The Fed defends its credibility," said Michael Heise, chief economist at HQ Trust.
Softer oil prices added to the bullish mood. Markets are pricing in the prospect that a key pipeline in Saudi Arabia could be returned to service soon, freeing additional capacity. Haris Khurshid, an investment strategist at hedge fund Karobaar Capital, cautioned against premature relief, noting that even with capacity restored, the market would have little cushion against unforeseen disruptions.
With oil retreating, inflation anxiety has also receded. Bond prices rose along with equities, pushing US Treasury yields lower. Strategists expect earnings growth to reassert itself as the primary driver of stock returns now that the rate decision is behind them.
UBS economists do not expect the Fed action to unsettle markets. At least one further increase remains probable, but much of the tightening cycle appears priced in. "Economic strength and robust corporate profits make higher rates easier to bear," the bank said in a research note.
In pre-market trading, AI-focused names led the advance. Shares of Nvidia, Micron, Intel, Marvell Technology and Sandisk were quoted between 2.2% and 4.5% higher. All seven Magnificent-7 tech stocks traded in positive territory.
Amazon secured a supply agreement worth up to $8 billion for generators from Generac to support its data centers. The deal sent Generac shares surging 32% in pre-market action. Amazon also holds an option to take a stake in Generac under the terms of the agreement.
