Stocks rebound as oil retreats a day after the Fed's first hike since 2023

• US: The S&P 500 closed up 1.14% at 7,637.76, the Nasdaq Composite 1.69% higher at 26,418.30 and the Dow up 0.61% at 51,778.04. The S&P finishes 2.29% below its 52-week high; the Dow sits 5.42% below its own and is still down 1.51% on the week.
• Europe: The FTSE 100 ended up 1.19% at 10,816.14, the DAX 0.7% higher at 25,716.71, the CAC 40 up 0.57% and the Euro Stoxx 50 up 0.9%.
• Asia: The Nikkei 225 closed 1.03% higher at 64,136.25, the Kospi rose 1.33% and Taiwan gained 1.71%; the Hang Seng slipped 0.26% and Shanghai added 0.29%.

The session was a reversal of Wednesday's Fed sell-off rather than a new story. The Federal Reserve raised the funds rate by 25 basis points to 3.75–4.00% on a unanimous vote, its first increase since 2023, with most officials pencilling in at least one more hike this year and Chair Kevin Warsh saying he was hard pressed to describe financial conditions as restrictive. The immediate reaction was a stronger dollar, higher front-end yields and lower stocks; today the market decided a Fed willing to lean against energy-driven inflation is tolerable so long as the energy shock itself is fading.

That is where oil comes in. Brent fell 1.52% to $104.22 and WTI 1.12% to $101.28 as Saudi Arabia moved to restore roughly half the capacity of its East-West pipeline within days, with full operations targeted in about six weeks, and offered extra cargoes to Asian refiners via ship-to-ship transfers outside Hormuz. Lower crude took pressure off the inflation outlook, and Treasury yields followed: the 10-year fell 5.9 basis points to 4.947%, the 5-year 5.8 basis points and the 30-year 5.3 basis points. Lower long yields are the direct mechanism behind the Nasdaq's outperformance, because they raise the present value of the distant earnings growth stocks are priced on.

The data helped at the margin. Jobless claims fell to 196,000 against roughly 207,500 expected and the Philadelphia Fed index jumped to 37.8 versus 30.5, both consistent with an economy that can absorb a hike. Housing starts missed at 1.275 million against 1.309 million expected, a reminder that mortgage rates near 7% are biting, which Lennar's guidance cut underlined.

Risk appetite returned decisively. The VIX fell 12.82% to 15.44 and the MOVE index of rates volatility dropped 5.59% to 76.22, so both equity and bond markets priced a calmer path. Sector dispersion was wide but ordered: technology led with a 2.25% gain while communication services (-0.58%) and financials (-0.09%) lagged, the latter still down 2.39% on the week. The dollar index eased just 0.09% to 100.223 and gold was flat at $4,380.90, so this was a relief rally rather than a flight from havens. Our own European breadth was solidly positive, with 2,826 advancers against 1,697 decliners across PrimerIQ's listed universe; the equivalent US figures are only available through Wednesday's session, when decliners outnumbered advancers 3,612 to 2,144.

Two central banks and three US prints landed today. The Bank of England held Bank Rate at 3.75% at 12:00 BST on a 6–3 vote, with Greene, Mann and Pill again voting for 4%; it flagged August CPI at 3.1% and said inflation is likely to rise further with risks tilted to the upside, while seeing little evidence yet of second-round effects in wages. Sterling nonetheless fell 0.87% to $1.3356 as the gap with a hiking Fed widened. The Fed's own move to 3.75–4.00% took effect today following Wednesday's decision.

At 08:30 ET, initial jobless claims fell to 196,000 (consensus about 207,500), August housing starts came in at 1.275 million against 1.309 million expected, and the Philadelphia Fed manufacturing index rose to 37.8 against 30.5. Nothing further is scheduled for the US today. Overnight, Japan's August CPI precedes the Bank of Japan decision at around 03:00 GMT (23:00 ET), where a 25 basis point rise to 1.25% is almost fully priced, with Governor Ueda's press conference at 06:30 GMT.

Next raised its full-year profit guidance for the fourth time this year, to £1.255 billion, after first-half pre-tax profit rose 10.5% to £569 million, though it expects full-price sales growth to slow to 5.8% in the second half; the update was well received. Lennar missed on both earnings ($1.23 adjusted versus $1.29 expected) and revenue ($8.05 billion versus $8.31 billion) and cut its 2026 delivery target to 80,000–81,000 homes, citing rates near 7%. In Frankfurt, Bilfinger fell 21.44% after slashing its EBITA margin guidance to 3.2–3.6% from 5.8–6.2% on postponed customer investment linked to the Middle East conflict. No major US names report after tonight's close.