The Federal Reserve On Wednesday hiked benchmark interest rates by 25 bps to a target range of 3.75% to 4.00%, in line with market expectations.
- Fed Chair Kevin Warsh’s comments also signalled that another rate hike could be coming this year, although he did not provide any explicit forward guidance.
- The Fed’s decision runs contrary to what U.S. President Donald Trump had in mind, saying a Truth Social post that interest rates in the U.S. should be 1% or less.
- On the economic front, markets will now tune into weekly jobless claims data expected on Thursday.
U.S. stock futures traded higher in the overnight session late Wednesday after the Federal Reserve announced a 25 basis points rate hike, upping benchmark rates for the first time in three years.
Dow futures climbed 0.62%, the S&P 500 gained 0.56%, and the Nasdaq-100 rose 0.57% at 10:54 PM EDT.
On Wednesday, all three benchmark indexes closed lower. The Dow Jones Industrial Average fell 1.21% at close, while the S&P 500 and the Nasdaq Composite lost 0.45% and 0.01%, respectively.
| Index | Move | Close |
| Dow Jones Industrial Average | -1.21% | 51,461.90 |
| S&P 500 | -0.45% | 7,551.81 |
| Nasdaq Composite | -0.01% | 25,978.42 |
Key US Market Drivers
U.S. markets reacted to the central bank’s first rate hike since 2023, although traders had already predicted that the Fed would hike benchmark rates, which now stand at a target range of 3.75% to 4.00%.
On Tuesday, data from the CME FedWatch clocked a 92.4% probability that the Fed will hike interest rates by 25 basis points.
Fed Chair Kevin Warsh’s comments also signalled that another rate hike could be coming this year, although he did not provide any explicit forward guidance.
“Our predominant focus is on the price stability side of our mandate,” Warsh said in his comments after the policy announcement. “The plain fact is that inflation is too high and has been for too long.”
The Fed’s decision runs contrary to what U.S. President Donald Trump had in mind: he has been pushing for lowered benchmark rates.
In a post on Truth Social on Wednesday, Trump said, “Interest Rates in the United States should be 1%, or less, because we are the Best Credit in the World — BY FAR. Our Country is BOOMING with new Investment! If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year. The word “Deficit” is nothing more than a fancy word for LOSS. We are “carrying” almost every country in the World, and that cannot go on any longer. LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!”
However, Trump defended his pick, Warsh’s decision, to reporters in North Carolina, saying that “he’s got a very tough board.”
“I told Kevin, I said, ‘You might as well vote with the board because it’s just not going to matter.’ The board is very hostile. They’re very political. They’re doing the wrong thing. They’re a bunch of politicians,” he said.
Meanwhile, market participants are increasingly divided on the ‘higher-for-longer’ narrative from the Fed. While some said that the move was warranted under current economic conditions, others called it a ‘policy mistake.’
Analyst Lark Davis indicated that President Trump’s recent economic decisions forced the Fed to hike interest rates amid rising oil prices and ballooning tariffs.
James E. Thorne, Chief Market Strategist at Wellington Altus, said in a post on X, “Hard to believe but Warsh is shaping up to be worse than Powell.”
Steve Rick, chief economist at TruStage, reportedly told CNBC, “The bigger question now is whether this rate increase is one and done or the beginning of another tightening cycle.”
On the economic front, markets will now tune into weekly jobless claims data expected on Thursday for further clues on the health of the U.S. economy.
Trending Stocks To Watch
SpaceX (SPCX): The aerospace company was on the retail radar after shares climbed more than 5% at close and continued to rise overnight after Morgan Stanley reiterated its ‘Overweight’ rating on the company amid its potential to make AI computing more efficient. Investors are also watching out for the next Starship launch that is expected to lift off on Sept. 22 and aim to reach orbit for the first time.
Candel Therapeutics Inc. (CADL): Shares of the biotech company were on the retail radar amid a 2% climb overnight after its experimental prostate cancer treatment CAN-2409 recently showed positive clinical results, with the company on track to submit a Biologics License Application to the FDA in the fourth quarter.
Snap Inc. (SNAP): Shares of the social media company gained more than 2% in the overnight session late Wednesday after it unveiled its new Specs Intelligence AI assistant and showcased its forthcoming Specs augmented reality glasses at an event.
Fluence Energy Inc. (FLNC): The company’s stock plunged more than 15% overnight after the battery storage company slashed its fiscal 2026 guidance for a second time this year due to ongoing delays at its Houston manufacturing plant.
Other Market Trends
Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY), SPDR Dow Jones Industrial Average ETF Trust (DIA) and the Invesco QQQ Trust (QQQ) climbed higher in the overnight session.
The U.S. 10-year Treasury yield was trading at 5.00% at the time of writing, while the U.S. 30-year Treasury yield was trading at 5.341%.
The iShares 20+ Year Treasury Bond ETF (TLT) was up 0.27% amid ‘extremely bearish’ sentiment.
Meanwhile, Brent crude futures expiring in November were down to $105.83 a barrel, while WTI crude futures expiring in October trading at $102.35 per barrel.
Asian markets opened mixed on Thursday. South Korea's KOSPI and Japan’s Nikkei 225 were trading higher at the time of writing, while China’s SSE Composite was trading lower. Australian stocks edged higher at the open.
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