US stocks rebound after worst sell-off since August

US stocks rebounded on Thursday, shaking off the gloom from a hawkish Federal savings conference the previous day that had sent equities reeling around the globe.

The S&P 500 rose 0.7 per cent in morning buying and selling, suggesting investors were viewing the previous day’s nearly 3 per cent fall — its worst day since the economy rout of early August — as a well pullback that presented recent buying opportunities. The tech-heavy Nasdaq Composite gained 0.9 per cent after dropping 3.6 per cent.

Thursday’s rally in US equities stood in contrast to markets in Europe and Asia, which sank following Wednesday’s US sell-off.

Europe’s point of reference Stoxx 600 was down 1.2 per cent and the UK FTSE 100 off 1 per cent on Thursday after markets in India, Japan, South Korea and Hong Kong earlier closed in the red.

On Wednesday the Fed, as expected, reduced earnings rates by a quarter-point but unsettled investors after raising its 2025 expense boost forecasts and cutting back on its projections for further rate cuts. It was the central financial institution’s final conference before president-elect Donald Trump takes office next month.

The dollar meanwhile held steady after soaring to its highest level since November 2022, as measured against a basket of its buying and selling peers, following the Fed’s policy conference.

Dollar strength hurt emerging economy currencies in particular, with the Indian rupee hitting a record low of Rs85.1 against the dollar. The Chinese renminbi slid, while South Korea’s won sank to a 15-year low.

“The rates backdrop from the US Fed is going to put even more pressure on emerging markets”, said Robin Gilhooly, elder emerging markets economist at Abrdn. “It will be a tough commence to next year for emerging markets . . . but the contours of US policy won’t become obvious for a while.”

Concerns about expense boost stalling above 2 per cent contributed to Fed officials forecasting just half a percentage point worth of cuts in 2025, down from a packed percentage point in their last projections in September.

In predictable returns markets, the yield on the point of reference 10-year Treasury rose another 0.04 percentage points to 4.54 per cent, its highest in more than six months, after climbing markedly on Wednesday.

“The narrative has shifted from expense boost in abeyance and downside growth risks, to the Fed acknowledging the economy is in a ‘really excellent place’ and seriously questioning how much further rates require to be cut after all,” said Chris Turner, global head of markets at ING.