U.S. stock futures moved higher on Thursday as investors assessed the implications of the Federal Reserve’s latest policy decision and a surprise agreement between the United States and Iran aimed at ending months of conflict.
The gains followed a sharp sell-off on Wall Street in the previous session, when rising Treasury yields and a more hawkish tone from the central bank unsettled investors.
By early morning trading, Dow futures had advanced 298 points, or 0.6%, while S&P 500 futures gained 0.8% and Nasdaq 100 futures climbed 1.4%.
Markets Recover After Fed-Induced Sell-Off
Wednesday’s trading session ended firmly in negative territory after the Federal Reserve left interest rates unchanged but signalled a tougher stance on inflation.
The Dow Jones Industrial Average lost 507 points, while the S&P 500 and Nasdaq Composite fell 1.2% and 1.3%, respectively.
Investors reacted to indications that policymakers remain concerned about inflationary pressures, particularly those linked to higher energy costs.
Among individual stocks, SpaceX (NASDAQ:SPCX) fell nearly 5%, pulling back after a powerful rally following its record-breaking market debut last week.
Warsh Signals New Direction for the Federal Reserve
Federal Reserve Chair Kevin Warsh used his first policy meeting to outline a broader review of the institution’s operations and communications.
Warsh announced the creation of five task forces that will examine areas including inflation, employment, communications strategy and data collection.
The central bank also released a notably shorter policy statement, reducing its length by more than 300 words compared with the previous meeting.
The statement focused heavily on the Fed’s commitment to “deliver price stability,” removing references to maximum employment that had traditionally formed part of the central bank’s dual mandate messaging.
Markets interpreted the revised language and updated economic projections as a sign that policymakers remain prepared to tighten monetary policy if inflation remains elevated.
The Fed’s latest dot plot showed nine officials expecting at least one interest-rate increase this year, compared with none in the March projections.
Stephen Brown, Chief North America Economist at Capital Economics, said the Fed has opened the door to a “hike as soon as September.”
Peace Deal Between Washington and Tehran Eases Energy Concerns
At the same time, geopolitical developments provided a measure of relief for investors.
Media reports indicated that the United States and Iran had signed a memorandum of understanding intended to end hostilities following months of conflict that disrupted global energy markets.
The agreement includes provisions aimed at reopening the Strait of Hormuz and restoring Iranian oil exports once U.S. sanctions are lifted.
President Donald Trump signed the accord during a dinner at the Palace of Versailles on Wednesday.
According to reports, Trump said he wanted to avoid an “economic catastrophe” and prevent comparisons with former President Herbert Hoover, whose administration coincided with the onset of the Great Depression.
Iranian President Masoud Pezeshkian reportedly signed the agreement on behalf of Tehran.
While negotiations concerning Iran’s nuclear programme remain unresolved, investors welcomed the prospect of lower geopolitical risk and improved energy supplies.
Oil Prices Extend Decline
Crude prices continued to retreat as traders assessed the possibility of additional oil reaching global markets.
Brent crude fell 2% to $77.97 per barrel, while U.S. West Texas Intermediate crude declined 2.1% to $75.15.
Although oil has retreated significantly from its wartime highs, analysts cautioned that prices may remain elevated due to lingering uncertainty surrounding the pace of supply normalisation.
“Iran expects a swift lifting of U.S. oil sanctions, supporting a return of exports. However, uncertainty remains about how quickly flows can normalize, with ramp-up timelines dependent on operational, logistical and sanction-related adjustments,” analysts at ING said in a note.
Apple Signals Potential Price Increases
Elsewhere, Apple (NASDAQ:AAPL) was in focus after The Wall Street Journal reported that the company plans to increase prices across parts of its product lineup to offset rising component costs.
“Unfortunately, price increases are unavoidable,” CEO Tim Cook told the Journal in an interview.
Cook pointed specifically to growing costs associated with memory and storage chips.
“We’re doing our best to mitigate the huge increases that are being passed to us […] but the situation has become unsustainable,” he told the Journal.
According to the report, Mac computers and iPads are expected to be among the first products affected, although the timing and scope of broader price increases remain unclear.