Tech leads US rally as Fed hikes rates and oil retreats

US equities ended mostly higher on Wednesday following the Federal Reserve’s (Fed) interest-rate decision, with technology shares leading the advance. At 20h32 SAST, the S&P 500 gained 0.15%, the Nasdaq Composite rose 0.67%, while the Dow Jones Industrial Average declined by 0.47%. The US dollar strengthened, with the Dollar Index rising above 100 points for the first time in almost seven weeks, as investors assessed the Fed’s 25-basis-point rate increase — its first since July 2023 — and signals that further increases could be considered. The ongoing oil-price shock is expected to add pressure to inflation and could prompt additional monetary tightening.

The market reaction suggested that investors had largely priced in the inflation increase, while the stronger performance of technology shares indicated some relief that the Fed had not adopted a more aggressive stance. The 10-year US Treasury yield eased to 4.95%, from the previous session’s 19-year high of 5.01%, although it remains 0.80 percentage points above its level at the start of the year. Longer-dated yields fell more sharply than shorter-term rates, while energy-price pressures, heavy corporate debt issuance and widening US budget deficits continued to weigh on the bond market.

Technology stocks extended their rebound from the previous session, with chipmakers and hardware companies leading the gains. Intel, Marvell and Dell each rose by more than 5%, while Nvidia and AMD gained around 3%. The recovery followed recent concerns around artificial intelligence (AI)-related risks, which had raised questions about the pace of spending by major cloud and technology companies. Banks, retailers and pharmaceutical stocks also ended mostly higher.

European equities edged higher as well, recovering from the previous session’s three-month low as a pause in the recent oil-price rally supported investor sentiment. The STOXX Europe 600 rose 0.60%, marking its strongest daily gain in a month, while the Euro STOXX 50 advanced 0.48% to 6 266.50. The FTSE 100 and CAC 40 each gained around 0.60%, while Germany’s DAX rose 0.30%. According to Reuters, energy stocks were among the weakest performers, while travel and leisure shares gained 1.20% as lower oil prices eased concerns over fuel costs. Semiconductor-related stocks also performed strongly, with Soitec rising 13.40% after JPMorgan upgraded the stock to overweight from neutral.

Asian markets closed higher, recovering from recent weakness as technology shares, particularly in the AI space, regained ground. Investors remained cautious, however, amid elevated oil prices and key central-bank policy decisions. Japan’s Nikkei 225 rose 0.69% to 63 923.00, while China’s Shanghai Composite advanced 0.71% to 3 891.60 and Hong Kong’s Hang Seng edged up 0.19% to 24 713.78.

The local bourse lost momentum towards the close, with the All Share Index dropping 0.41% and Industrials leading the losses with a fall of 1.21%. The Top 40 closed 0.48% lower and Financials ended 0.55% down. The rand weakened against the US dollar to trade at R16.38 at 20h55 SAST. The local bourse lost momentum towards the close, with the All Share Index dropping 0.41% and Industrials leading the losses with a fall of 1.21%. The Top 40 closed 0.48% lower and Financials ended 0.55% down. The rand weakened against the US dollar to trade at R16.38 at 20h55 SAST. Despite the market’s weakness, domestic retail sales exceeded expectations, rising 3.40% year on year in July — well above the 0.90% forecast and marking the strongest increase since January.

On the commodity front, oil prices retreated on Wednesday, although the fragile situation in the Middle East continues to keep supply risks elevated. Brent crude traded at $105.51 per barrel, down 2.98%, while prices also eased as markets weighed expectations that Saudi Arabia could begin restoring capacity on a key East–West pipeline affected by recent damage. Saudi Aramco is reportedly working on a temporary route around the damaged section, with around half of the pipeline’s capacity potentially returning within days and full operations expected to take several weeks. US Energy Secretary Chris Wright said the disruption could be resolved within days, although independent analysts have cautioned that repairs may take longer.

In precious metals, gold pared some of its gains, trading at $4 275.09 an ounce, up 0.41%, while silver dropped to roughly $63 per ounce.