US Stocks Rally After Federal Reserve Hikes Interest Rates

US stock markets experienced their strongest day in six weeks on Thursday, recovering from a sell-off triggered by the Federal Reserve System raising the federal funds rate by 25 basis points to a range of 3.75%-4.00%. The move, the first increase since mid-2023, was led by Chair Kevin Warsh to combat energy-driven inflation and reflect a strengthening economy. While President Donald Trump criticized the hike and called for lower rates, investors viewed Warsh's hawkish tone as a restoration of the central bank's credibility and independence.

The Nasdaq Composite led the rally with a 1.69% gain, followed by the S&P 500 at 1.14% and the Dow Jones Industrial Average at 0.61%. Gains were driven by AI infrastructure stocks, including Intel and Micron, as well as a decline in oil prices and Treasury yields. Internationally, European equities rose, and the Bank of England maintained its benchmark rate at 3.75%, despite warnings that Middle East energy disruptions could spike UK inflation.

Market sentiment was further bolstered by Donald Trump expressing optimism that the seven-month war with Iran is nearing an end, with diplomatic meetings expected during the UN General Assembly. In corporate news, Johnson & Johnson CFO Joe Wolk projected double-digit growth for the healthcare company, while Generac signed a $2.4 billion deal to supply backup generators to Amazon data centers.