Now that the Federal Reserve has made its stand against inflation public policy via its first rate hike in three years, raising the federal funds rate 1/4 of a percent, from 3.50-3.75% to 3.75-4.00% on Wednesday, the outlook for financial assets has become cloudier.
What comes next relies more on sentiment than actual facts on the ground. The Wall Street cognoscenti, in control of most of the money flows in and out of equities, will likely brush off the rate hike as little more than in blip in the overall market function. A quarter point hike isn't likely to upend the applecart, though outside developments in the Middle East and in the AI sector might give some pause to consider the general overvaluation of stocks.
A pushback rally on Thursday is a good possibility, especially after the late-day surge on the major indices Wednesday. Bargain hunters and dip buyers will be out in force. Stock futures are higher across the complex with Dow futures soaring (+660) with the opening bell due to ring in just a half hour. NASDAQ futures are up 450 and S&P futures show a 93-point rise.
It's not surprising to anyone at this point that Wall Street will whistle right past the Fed decision, though how long the party lasts is another question. The major indices are well off their all-time highs, stocks have been down seven of the past eight sessions through Wednesday, and the questions on inflation, gas prices, and the general conflict with Iran are far from resolution.
Right on cue, yields on the 10-year note and 30-year bond have fallen and WTI crude oil futures have dropped below $96/barrel.
Thursday morning's good news probably won't offset the damage done the previous few weeks to stocks, but when the big money sees a buying opportunity, retail investors seem to fall in line with enthusiasm. One bright side is an overnight rally in precious metals, with gold and silver both erasing losses from Wednesday.
What Washington does in advance of the midterms isn't likely to have much effect on stock prices. The next big event horizon is still a few weeks off, when third quarter earnings begin to release.
It's a trader's market at this point and the general feeling - at least for today - seems to be pointing towards ignoring inflation, Iran, and just about anything that might smell just a bit sour.
At the Close, Wednesday, September 16, 2026:
Dow: 51,462.14, -630.97 (-1.21%)
NASDAQ: 25,978.42, -3.15 (-0.01%)
S&P 500: 7,551.81, -33.92 (-0.45%)
NYSE Composite: 23,919.04, -209.42 (-0.87%)
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