Global Markets Rally After Federal Reserve Interest Rate Hike

Global stock markets experienced significant volatility following the first interest rate hike by the Federal Reserve System in over three years. The central bank raised the federal funds rate by a quarter of a percentage point to a target range of 3.75% to 4% to combat high inflation. While the decision initially triggered a sell-off, Wall Street rebounded on Thursday, marking its best day since August. The S&P 500 rose 1.1% and the Nasdaq Composite jumped 1.7%, driven by gains in AI and semiconductor stocks including Nvidia, Intel, and Advanced Micro Devices.

Market sentiment was further bolstered by falling oil prices, as the Government of Saudi Arabia worked to restore its East-West pipeline and increase shipments to Asia. This decline in energy costs eased inflation concerns and pushed the 10-year Treasury yield below 5%. In Asia, the Bank of Japan followed the U.S. lead by raising its benchmark interest rate to a 31-year high of 1.25%.

Geopolitical factors also influenced the rally. President Donald Trump indicated that the U.S. is "hopefully toward the end" of its conflict with Iran, while the Government of China requested that Iran restrain Houthi militants to reduce shipping disruptions. However, the momentum shifted by Friday as Treasury yields rebounded to 5.0% and crude oil climbed back above $100 a barrel. This caused the Dow Jones Industrial Average to fall 0.5% and the S&P 500 to drop 0.3%, with interest-rate-sensitive sectors like housing seeing significant losses.