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US stocks rebounded on Thursday, lifting the gloom from a hawkish Federal Reserve meeting the previous day that had sent equities tumbling around the world.
The S&P 500 rose 0.7 percent in morning trading, suggesting investors viewed the previous day's nearly 3 percent fall — its worst day since the market's breakout in early August — as a healthy pullback that revealed new buying opportunities. The tech-heavy Nasdaq Composite gained 0.9 percent after dropping 3.6 percent.
Thursday's rally in US equities stood in contrast to markets in Europe and Asia, which slumped after Wednesday's US sell-off.
The European benchmark Stoxx 600 was down 1.2 percent and the UK FTSE 100 down 1 percent on Thursday after markets in India, Japan, South Korea and Hong Kong earlier closed in the red.
On Wednesday the Fed, as expected, reduced the interest rate by a quarter-point but investors are not satisfied after raising inflation for 2025 and reducing its forecasts for reducing the rate of increase. It was the central bank's last meeting before president-elect Donald Trump takes office next month.
The dollar was then steady after rising to its highest level since November 2022, as measured against a basket of trading peers, following the Fed's policy meeting.
Dollar strength hurt emerging market currencies in particular, with the Indian rupee hitting a record low of Rs85.1 against the dollar. China's renminbi slipped, while South Korea's economy fell to a 15-year low.
“The rate hikes from the US Fed will put more pressure on emerging markets,” said Robin Gilhooly, chief economist at Abrdn. “It's going to be a tough start next year for emerging markets. . . but US policy won't be clear for a while. “
Concerns about inflation falling above 2 percent contributed to Fed officials forecasting a half-percent rate cut in 2025, down from a full percent in their last forecast in September.
In bond markets, the yield on the benchmark 10-year Treasury rose another 0.04 percentage points to 4.54 percent, the highest in more than six months, after rising significantly on Wednesday.
“The narrative has shifted from inflation and reducing risks to growth, to the Fed admitting the economy is 'in a really good place' and seriously asking how many more rate cuts it needs to cut after all,” said Chris Turner, global head of the Fed. markets in ING.