Futures storm back as oil cracks and the 10-year slips below 5%

• US, Wednesday's close: the Dow ended down 1.21% at 51,461.90, the S&P 500 down 0.45% at 7,551.81 and the Nasdaq Composite effectively flat at 25,978.42 (-0.01%).
• The live US read is futures: S&P 500 futures are up 2.12% and Nasdaq 100 futures up 2.60% as of 08:45 ET — a wholesale reversal of yesterday's afternoon.
• Europe is mid-session higher: the Euro Stoxx 50 is up 1.08%, the DAX 0.93%, the FTSE 100 0.87% and the CAC 40 0.79%.
• Asia finished mixed: the Nikkei closed up 0.33%; the Hang Seng ended 0.44% lower and the Shanghai Composite 0.41% lower.

Wednesday belonged to the Federal Reserve. The committee raised rates by a quarter point to 3.75–4.00%, its first increase in more than three years, and its projections point to one more this year. Equities initially took it calmly; they turned when Chair Kevin Warsh used his press conference to say that this summer's inflation readings did not tell him underlying trends had meaningfully improved. Rate-sensitive and cyclical exposure took the damage — financials and energy were the worst US sectors on the day.

This morning the market is unpicking the premise. A large part of the inflation impulse Warsh is worried about has been an energy supply shock: the outage on Saudi Arabia's East-West pipeline, which US officials have said should last only days, with additional barrels routed via Oman. Brent has fallen 3.12% to $102.53 and WTI 2.31% to $100.06. Cheaper crude softens the headline inflation path, and the rates market has responded — the 10-year yield is down 5.5 basis points to 4.951%, the five-year down 6.0 basis points.

That is why the rebound is led by the Nasdaq rather than the Dow: long yields set the discount rate on cash flows arriving years out, so growth and AI-linked names gain most when they fall. The scale of the futures move relative to the news flow, though, argues that positioning and an oversold afternoon are doing real work alongside the fundamentals.

Risk appetite has flipped hard. The VIX is down 12.76% at 15.45, more than 56% below its 52-week high, and the MOVE index of rates volatility closed 3.56% lower at 80.73 — neither market is pricing stress. The safe-haven complex agrees: gold is up only 0.29% at $4,400.30 and the dollar index is down 0.18% at 100.13, so this is not a defensive bid. Copper up 2.73% points the same way.

The caution is in what preceded it. Across PrimerIQ's US universe on Wednesday, 2,142 names rose against 3,608 that fell — an advance/decline ratio of 0.59 and a mean move of -0.18%. Our US sector medians were negative almost everywhere, energy at -2.24% and financial services at -1.20%, with only utilities (+0.30%) and healthcare positive. A two-point futures gap sits on top of a tape that was broadly heavy.

The 08:30 ET batch broke the Fed's way. Initial jobless claims fell to 196,000 for the week ending 12 September, below the roughly 208,000 expected and under the prior week's 206,000; continuing claims fell to 1.730m. Housing starts dropped 2.6% to an annualised 1.28m against a 1.32m consensus, with multifamily the weak spot — Bloomberg described it as one of the softest paces since the pandemic. The Philadelphia Fed's September manufacturing index came in at 37.8 against a forecast of 31.3, though down from 47.4 in August.

The combination — a tight labour market, a cooling housing sector, still-expanding factories — gives both camps something. Pending home sales for August follow at 10:00 ET and will be read straight against this morning's starts miss.

Lennar has already reported, and it landed awkwardly: third-quarter EPS of $1.23 against a $1.29 consensus, with revenue down 8.67% year on year — a homebuilder missing on the same morning that housing starts undershot. Beyond that, nothing of consequence has come through before the bell.