US stocks rebounded sharply on Thursday as falling oil prices, lower Treasury yields and resilient labor-market data helped investors look beyond the Federal Reserve’s first interest-rate increase in more than three years.
All three major US stock indexes ended higher, with technology stocks leading a broad-based rally that pushed the Nasdaq Composite to the strongest gain among the major benchmarks.
The rebound came a day after the Federal Reserve unanimously raised its federal funds target rate for the first time since July 2023, signaling that further monetary tightening could follow as policymakers seek to bring inflation back toward their 2% target.
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“We’re seeing interest in the areas of the market that have been hit hard in anticipation of this Fed rate hike,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut. “And people sort of stepping in, doing a little bit of buying on the pullback.”
The decline in oil prices provided another source of relief for investors. Crude touched a one-week low after reports that Saudi Arabia was moving additional oil through Oman eased some concerns about supply disruptions. Oil prices later pared their losses as tensions in the Middle East remained elevated. Energy prices have surged since the start of the US-Israeli war against Iran, creating a major source of inflationary pressure for the global economy.
The oil market has become crucial for financial markets because a prolonged rise in energy prices could make the Federal Reserve’s inflation fight more difficult. Lower crude prices, by contrast, could reduce pressure on consumers and businesses while giving the central bank greater room to focus on economic growth and employment.
“The market is a bit relieved at the Fed’s coherence in that they all voted in the same way,” said Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky. “Fed Chair Warsh re-emphasized the Fed’s independence.”
Markets are already pricing in a higher probability of another rate increase. CME’s FedWatch tool showed a 53.1% likelihood of a further 25-basis-point hike at the Fed’s October meeting, compared with 27.2% a week earlier.
Fed Chair Kevin Warsh said at his Wednesday press conference that the US economy remained strong and that restoring price stability did not necessarily have to damage the labor market. Fresh employment data offered support for that assessment. The Labor Department’s weekly jobless claims report showed initial claims falling to levels near those last seen in 1969, suggesting that the labor market remains resilient even as monetary policy tightens.
That combination of firm employment data and easing energy prices helped improve the market’s tone. The CBOE Volatility Index, commonly known as Wall Street’s fear gauge, fell to its lowest level in more than a week as crude prices eased.
“When you have an oil shock this lengthy, it’s bound to start to seep in prices all across the economy,” Mayfield said. “It’s really the only major headwind facing the global economy right now. And to get any sort of relief or resolve for consumers, it’s a tailwind for corporates, and it allows the Fed to be less hawkish.”
The Dow Jones Industrial Average rose 317.95 points, or 0.62%, to 51,779.85. The S&P 500 gained 85.93 points, or 1.14%, to 7,637.74, while the Nasdaq Composite climbed 439.87 points, or 1.69%, to 26,418.30.
Technology Stocks Lead Broad Market Rebound
Technology was the strongest-performing sector among the 11 major S&P 500 sectors, extending the recovery in growth-oriented stocks following recent pressure over interest rates and the outlook for AI-related investment.
Financials and consumer staples were the only sectors to finish lower, although their losses were modest.
Semiconductor stocks were among the biggest gainers, with the Philadelphia Semiconductor Index advancing more than 3%. Gold and silver miners also gained more than 3%.
Homebuilders rose 1.1% after housing data showed that single-family housing starts and pending home sales increased last month. The data offered another indication that parts of the interest-rate-sensitive housing market were holding up.
Banks also stabilized after taking a heavier hit in the previous session. The S&P 500 bank index rose 0.2% on Thursday, following a 2.3% decline on Wednesday.
The movement in bank stocks comes as investors assess what higher interest rates mean for lenders. While higher rates can support lending margins, they can also increase funding costs and put pressure on interest-rate-sensitive areas of the economy.
Crypto-linked stocks also rallied after the US Securities and Exchange Commission announced a five-year exemption for tokenized stock trading. Circle Internet Group and Coinbase each rose 5.8%, while Robinhood gained 5.2%.
Individual companies nevertheless faced significant selling pressure.
CoreWeave fell 4.2% after announcing plans to raise capital through stock and convertible bond offerings, adding to concerns about dilution as the AI infrastructure company continues to fund its expansion.
Fluence Energy plunged 15.4% after cutting its fiscal 2026 revenue forecast.
Market breadth was broadly positive. On the New York Stock Exchange, advancing stocks outnumbered declining issues by 2.38 to 1, with 112 new highs and 164 new lows.
On the Nasdaq, 3,274 stocks advanced while 1,483 declined, giving advancing stocks a 2.21-to-1 advantage.
The S&P 500 recorded 12 new 52-week highs and 20 new lows. The Nasdaq Composite recorded 60 new highs and 127 new lows.
Trading activity was also above recent averages. Volume across US exchanges reached 17.57 billion shares, compared with an average of 15.37 billion shares over the previous 20 trading sessions.
Thursday’s rally therefore came from several directions rather than a single catalyst. Falling oil prices reduced some of the immediate inflation pressure created by the Middle East conflict, Treasury yields eased, employment data remained strong, and investors moved back into technology and other stocks that had come under pressure ahead of the Fed’s decision.
The larger market concern remains how those forces interact with the Federal Reserve’s tightening cycle. Analysts say a resilient labor market could give policymakers room to raise rates further, while sustained weakness in oil prices could reduce inflationary pressure.