US stock indexes advanced on Thursday, extending a recovery from Wednesday's modest pullback after the Federal Reserve raised interest rates for the first time in three years. Falling oil prices provided additional tailwind.
The Dow Jones Industrial Average rose 0.30% to 51,615 points about half an hour after the open, recovering ground lost after Wednesday's rate decision. The S&P 500 climbed 0.84% to 7,615 points, while the technology-heavy Nasdaq 100 gained 1.46% to 29,367 points.
Investors digested the Fed's decision despite prior expectations. Fed Chair Kevin Warsh's stated commitment to fighting inflation was well received, as was the central bank's continued independence from political pressure. "The Fed is defending its credibility," said Michael Heise, chief economist at HQ Trust.
Oil prices continued to fall, supporting equities after they had begun lifting markets on Wednesday ahead of the rate decision. Investors are betting that an important oil pipeline in Saudi Arabia could be brought back online soon. "I would not call it all-clear yet," said Haris Khurshid, investment strategist at the Karobaar Capital hedge fund. While the market would regain some capacity, there would be little buffer for unforeseen disruptions.
Analysts expect earnings expectations for companies to return as the primary driver of stock moves after the rate increase. Strategists at UBS do not believe markets will be thrown off track by the Fed's decision. At least one more rate hike remains likely, but much has already been priced in, UBS said. Economic strength and solid corporate profits would make rising rates easier to bear.
Semiconductor stocks led gains on the Nasdaq 100, buoyed by the artificial intelligence theme. ARM, Intel and Micron Technology posted gains of up to 7.4%. On Semiconductor recovered 3.1%, after Wednesday's decline when the company failed to convince investors of its long-term growth strategy during an investor day event. Industry leader Nvidia rose 2.4%.
Generac surged more than 20%, rebounding from a low not seen since February. The energy-technology specialist supplies generators worth $8 billion to Amazon for its data centers, and the deal includes an option for Amazon to take a stake in Generac. Amazon shares rose 1.6%.
