US stocks have bounced back after the worst sell-off since August

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US stocks rallied again on Thursday, shaking off the gloom over the previous day’s hawkish Federal Reserve meeting that had sent funds around the world reeling.

The S&P 500 was up 0.7 percent in morning trading, indicating that investors viewed the previous day’s nearly 3 percent fall — its worst day since the market opened in early August — as a healthy recovery that provided new buying opportunities. The tech-heavy Nasdaq Composite gained 0.9 percent after falling 3.6 percent.

Thursday’s session in the US was different from the European and Asian markets, which fell after Wednesday’s trade in the US.

Europe’s benchmark Stoxx 600 fell 1.2 percent and the UK FTSE 100 from 1 percent on Thursday after markets in India, Japan, South Korea and Hong Kong closed earlier.

On Wednesday, the Fed, as expected, cut interest rates by a quarter-point but unsettled traders after raising its 2025 inflation forecast and reducing expectations for rate cuts. It was the central bank’s last meeting before President Donald Trump takes office next month.

The dollar meanwhile rose to its highest level since November 2022, as measured by its trading partners, following the Fed’s policy meeting.

The dollar’s strength hurt emerging market currencies in particular, with the Indian rupee depreciating by Rs85.1 against the dollar. China’s renminbi fell, while South Korea’s winning streak fell to a 15-year low.

“The interest rates from the US Fed will put a lot of pressure on emerging markets,” said Robin Gilhooly, emerging markets economist at Abrdn. “It will be difficult to start next year in emerging markets. . . but US policies are not known for a while. “

Concerns about an inflation rate of more than 2 percent helped Fed officials forecast a contraction of half a percent in 2025, down from a full percent in what they expected in September.

In bond markets, the yield on the 10-year Treasury rose another 0.04 percent to 4.54 percent, the highest in six months, after hitting a record high on Wednesday.

“The story has shifted from rising inflation and growth risks, to the Fed admitting that the economy is in a ‘very good place’ and raising doubts about how much more interest rates should be cut,” said Chris Turner, head of the International Monetary Fund. markets at ING.