Wall Street didn’t exactly love the US interest rate hike on Wednesday.
The Federal Reserve raised rates for the first time in more than 3 years.
Initially, US shares headed lower as investors took in what the Fed had to say.
But that didn’t last long.
By Thursday, buyers were back.
The S&P 500 Index (SP: .INX) climbed 1.1%, while the Nasdaq Composite Index (NASDAQ: .IXIC) jumped 1.7% and the Dow Jones Industrial Average Index (DJX: .DJI) added 0.6%.
That led the S&P 500 and Nasdaq to their strongest sessions in around 6 weeks.
And Aussie investors could get a bit of that rebound, too, today.
S&P/ASX 200 Index (ASX: XJO) futures are pointing around 0.6% higher this morning after a rough few weeks.
Rates could still go higher
The thing is, the Fed hasn’t exactly gone soft.
Its benchmark rate now sits between 3.75% and 4%, and chair Kevin Warsh said getting inflation back towards 2% remains the priority.
So, there could be another hike coming as well.
The Fed’s latest projections showed 16 of 18 policymakers expect rates to rise at least once more this year.
Normally, that would make life a little harder for growth stocks, especially the big tech companies that helped drive Thursday’s rally.
So why were investors buying again?
Well, it seems that Wall Street is becoming a little more comfortable with higher rates, provided the US economy keeps holding up.
Oil is helping calm things down
Oil is starting to take a little pressure off as well.
Brent crude has fallen for a second straight session to currently US$104.14 a barrel, while WTI is at US$101.14.
Yes, that’s still expensive, but it is well off the levels we saw earlier in the week.
Saudi Arabia is reportedly trying to restore around half the capacity of its damaged East-West Pipeline within days. It’s expecting to be back at full operations within 6 weeks.
In addition, China has privately asked Iran to help rein in Yemen’s Houthis after Saudi Arabia sought Beijing’s support.
This seems to have eased some fears that the supply situation in the Middle East could get worse.
What does this mean for the ASX?
All of this gives the ASX 200 a better backdrop heading into today’s session.
Wall Street finished higher, oil has pulled back, and the US 10-year Treasury yield has dropped below 5%.
That should take a bit of pressure off our stock market for now.
The post Wall Street just shrugged off the Fed rate hike. Could the ASX 200 be next? appeared first on The Motley Fool Australia.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.