U.S. stock futures pointed higher on Thursday, indicating a stronger start for Wall Street after equities sold off sharply following the Federal Reserve’s latest policy decision.
Investor sentiment improved after the United States and Iran formally signed a preliminary agreement aimed at ending the conflict in the Middle East, easing concerns over energy supplies and global economic stability.
U.S. and Iran Formalize Framework for Peace Talks
President Donald Trump and Iranian President Masoud Pezeshkian have signed a memorandum of understanding that establishes a framework for negotiations toward a permanent peace agreement.
The accord takes effect immediately and includes the reopening of the Strait of Hormuz by Iran and the removal of the U.S. naval blockade on Iranian ports.
Under the 14-point agreement, both countries will begin negotiations over the next 60 days in an effort to secure a lasting settlement.
Oil Prices Extend Decline
The prospect of renewed energy flows from the region continued to pressure crude prices lower.
Oil futures moved closer to levels seen before the conflict erupted in late February, reflecting expectations of improved supply conditions and reduced geopolitical risk.
“That has huge significance for inflation and interest rates, as well as business, consumer and investor sentiment,” said Russ Mould, investment director at AJ Bell. “It takes the pressure off industries and households and is hugely positive for global economic growth.”
Intel Leads Pre-Market Gains
Technology stocks appeared poised to benefit from the improved risk environment, with Intel (NASDAQ:INTC) rising 8.5% in pre-market trading.
The advance followed comments from Trump on Truth Social stating that Apple (NASDAQ:AAPL) has agreed to work with Intel on designing and manufacturing chips in the United States.
The announcement boosted optimism surrounding domestic semiconductor production and helped support broader sentiment in the sector.
Fed Decision Weighs on Previous Session
Despite an initial mixed reaction, U.S. stocks ended Wednesday’s session sharply lower after investors assessed the Federal Reserve’s latest policy statement and economic projections.
The Nasdaq fell 354.69 points, or 1.3%, to 26,021.66, while the S&P 500 declined 91.25 points, or 1.2%, to 7,420.10. The Dow Jones Industrial Average dropped 507.12 points, or 1%, to 51,492.55.
Policymakers Signal Possibility of Higher Rates
As expected, the Federal Reserve left its benchmark interest rate unchanged at a range of 3.5% to 3.75%.
However, updated projections suggested some policymakers believe rates could be higher by the end of the year.
The median forecast now points to rates reaching 3.8% by the end of 2026, marking a notable shift from the rate-cut expectations outlined in March.
Inflation Remains a Key Concern
In a substantially shorter policy statement, the Fed said economic activity continues to expand at a solid pace despite uncertainty linked in part to developments in the Middle East.
Officials also emphasized that inflation remains above the central bank’s long-term target of 2%, citing supply-related pressures that have contributed to higher prices in areas such as energy.
Retail Sales Surprise to the Upside
Earlier economic data provided evidence of continued consumer resilience.
The Commerce Department reported that retail sales increased 0.9% in May, following a revised 0.4% gain in April.
Economists had expected a more modest increase of 0.5%, making the latest reading a positive surprise for markets.
Software and Transport Stocks Lead Sell-Off
Wednesday’s market decline was led by significant weakness in software companies, with the Dow Jones U.S. Software Index falling 3.2% to its lowest closing level in two months.
Transportation shares also came under heavy pressure, dragging the Dow Jones Transportation Average down 3%.
Retail stocks retreated despite the stronger-than-expected sales figures, while oil services, gold and commercial real estate companies also moved lower.
Brokerage firms and semiconductor stocks were among the few areas of relative strength during the session.