Fed rate hike risks worsening China’s economic divide

Dow Jones futures rose by 0.82% to reach around 51,930 during weekday trading, while S&P 500 futures climbed by 0.82% to sit near 7,620, and Nasdaq 100 futures increased by 0.98% to hover near 29,250. Positive market sentiment boosted US stock futures as oil prices fell due to eased concerns about supply disruptions and inflation.

Saudi Arabia announced plans to restore nearly half the capacity of its East-West pipeline within days, aiming for full operation within six weeks. This was backed by US military assistance and stepped-up efforts to transport larger volumes of crude through the Strait of Hormuz with help from US forces. Additionally, US Energy Secretary Chris Wright confirmed that 18 million barrels of crude and petroleum products had successfully traversed the Hormuz Strait earlier in the week.

This favorable early-market performance followed Wall Street's decline overnight after the Federal Reserve announced its first interest rate hike in three years, raising the federal funds rate by 25 basis points to a range of 3.75% to 4.00%. Despite matching market expectations, investors remained cautious due to hints that further rate hikes might still occur before the year's end.

Deutsche Bank analysts noted that the equity sell-off was uneven across sectors, with growth stocks helping to mitigate the broader decline. Tech stocks bolstered the Nasdaq (-0.01%), while the Mag-7 (-0.11%) and the Philly Semiconductor Index (+0.63%) both advanced. Conversely, blue chip stocks suffered sharper losses, with Dow Jones (-1.21%) dropping to a three-month low, and banks (-2.30%) and energy stocks (-2.97%) leading the decline in the S&P 500.

The Dow Jones Industrial Average, comprising the 30 most traded stocks in the US, is a price-weighted index that reflects the aggregate performance of its constituent companies and is influenced by US and global macroeconomic data, interest rates set by the Federal Reserve, and inflation metrics.