The Federal Reserve delivered its first interest rate hike in over three years on Sept. 16, 2026, raising the federal funds rate by 0.25 percentage points to a target range of 3.75%-4%.
The S&P 500 fell 0.5%, and the Nasdaq Composite ended slightly lower, dragged down by declines in tech stocks.
Stock futures rise ahead of Fed interest rate decision
Traders assigned a 92.5% probability to the rate increase based on CME FedWatch data, with 45% odds of another quarter-point hike in October and 30% in December. The decision came as core inflation—a measure excluding food and energy—rose 0.3% in August, exceeding estimates. U.S. diesel prices hit $6 per gallon for the first time, driven by supply constraints in key regions. The 10-year Treasury yield hovered near 5%, while the 30-year yield stood at 5.374%, according to sources.
Market Reactions and Analyst Warnings
The Fed’s decision triggered sharp reactions from market analysts and investors. Brent Wilsey, chief investment officer at San Diego-based Wilsey Asset Management, argued that a decision by the Fed to leave rates unchanged would pose substantial risks. That could surprise stocks, and surprises are rarely received well in markets, and it could also damage the Fed's credibility, and reignite concerns that the central bank is caving to political pressure to keep rates steady,
Wilsey said, according to CNBC. Meanwhile, Steve Rick, chief economist at TruStage, questioned whether the rate increase would be a one-time move or the start of a tightening cycle. The Fed should give this increase time to work before determining how much additional restraint is necessary,
he added.
President Donald Trump demanded huge Federal Reserve rate cuts hours after the central bank raised rates. Despite these challenges, Generac’s shares surged over 30% in extended trading after Amazon received warrants to buy up to $340 million of its shares.
Stock market today
Global Markets and Economic Outlook
Global markets showed mixed reactions to the Fed’s decision. South Korea’s Kospi added 0.12%, while Hong Kong’s Hang Seng slipped 0.18%. European stocks rose broadly, with the Stoxx 600 up 0.4% and the FTSE 100 climbing 0.4%. Investors now await key economic data, including weekly jobless claims and August housing starts, to gauge the economy’s resilience. The Fed’s move also raised questions about how rising borrowing costs would impact residential construction and consumer spending.
The central bank’s decision underscores the delicate balance between controlling inflation and avoiding a recession. However, analysts caution that further rate hikes could worsen financial stress for households and businesses already grappling with high borrowing costs. As markets digest the Fed’s latest move, the focus will shift to whether this rate increase marks the end of the tightening cycle or the beginning of another round of monetary restraint.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., Sept. 16, 2026. Jeenah Moon | ReutersStock futures climbed early Thursday following a market sell-off incited by the first Federal Reserve interest rate hike in three years. Futures tied to the Dow Jones Industrial Average advanced 349 points, or 0.7%. S&P 500 futures were up 0.7%, and Nasdaq-100 futures added 0.9%. Generac rose more than 30% in extended trading after Amazon received warrants to buy up to $340 million of its shares. The warrants are part of a deal in which Generac will supply Amazon with backup power generators for its data centers.
Dow Jones Futures Rise After Hawkish Fed, Warsh Hit
In regular trading, the blue-chip Dow lost more than 630 points, or 1.2%, dragged down by financial services names. The broad market S&P 500 edged lower by 0.5%, while the tech-heavy Nasdaq Composite ended the session marginally lower. In a widely anticipated move, the Fed raised the overnight federal funds rate by a quarter percentage point on Wednesday afternoon, bringing the target range to 3.75%-4%. Policymakers also signaled another hike could come this year, with Fed Chairman Kevin Warsh saying that inflation remains too high. Indeed, August’s latest consumer price index reading came in 3.4%, and oil prices have surpassed $100 per barrel.
The bigger question now is whether this rate increase is one and done or the beginning of another tightening cycle,
said Steve Rick, chief economist at TruStage. “Higher oil prices stemming from continued conflict in the Middle East could keep inflation elevated, but monetary policy works with long and variable lags, and additional increases would put more pressure on consumers and businesses already facing elevated borrowing costs,” he added. The Fed should give this increase time to work before determining how much additional restraint is necessary.
Investors are now turning to Thursday’s economic data for further clues on the health of the economy. Weekly jobless claims data will be out at 8:30 a.m. ET. Traders are also monitoring August’s housing starts, which could offer a read on how elevated borrowing costs are affecting residential construction. Mainland China’s CSI 300 closed 0.45% lower. Australia’s benchmark S&P/ASX 200 rose 0.41%.
Dow Jones futures rose solidly early Thursday, along with S&P 500 futures and Nasdaq futures. President Donald Trump demanded huge Federal Reserve rate cuts hours after the central bank raised rates. The stock market retreated Wednesday after the Federal Reserve raised interest rates for the first time since 2023, signaled one more hike by year-end and Fed chief Kevin Warsh… Copyright ©2026 Investor’s Business Daily, LLC. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8