U.S. stock futures went up on Thursday after a sell-off in the wake of the Federal ReserveFederal Reserve's latest rate hike.
The Dow Jones Industrial Average DJIA fell by 530 points, or 1.63%, to 32030, the S&P 500 SPX declined by 66 points, or 1.65%, to 3937, and the Nasdaq Composite COMP fell 190 points, or 1.6%, to 11670 on Wednesday.
On Thursday, stock futures were firmer as investors reassessed the market's negative reaction to events late in the previous session.
The S&P 500 had turned a better than 1% gain into a 1.65% loss on Wednesday, after traders were disheartened by Treasury Secretary Janet Yellen telling a Senate committee that blanket deposit insurance hadn't been considered or discussed by her department.
Reports earlier in the week that the government was considering a wholesale backstop to bank deposits was considered an important factor in calming the financial sector and driving the latest stock market rally, so a denial of that potential support did not go well with equity bulls.
There was lingering uncertainty about the trajectory of Federal Reserve policy that was damaging to sentiment. The Fed raised interest rates by 25 basis points to a range of 4.75% to 5%, but Chair Jerome Powell disagreed with investors' belief that the central bank will have cut rates to around 4.2% by the end of the year.
Powell said that rate cuts are not in our base case.
According to Stephen Innes, managing partner at SPI Asset Management, the belief that Powell will be proven wrong was reflected in the improvement in market sentiment on Thursday.
The market bets that the Fed will lose its nerve and downshifts anyway, so the U.S. futures are going to go up. Innes said that the modern-day history book of the Fed pauses is very bullish for stocks.
The 10-year Treasury yield TMUBMUSD 10 Y, up just 2.6 basis points, was supporting the mood, with the 10 year Treasury yield TMUBMUSD 10 Y up just 2.6 basis points to 3.471%.
A strong showing for Asian bourses on Thursday - the Hang Seng HSI in Hong Kong rose 2.3% - was underpinning sentiment.
Some relatively strong gains were recorded in Asia with investors choosing to focus on the possibility of stronger conditions in the region, propelled by the reopening of the Chinese economy. Richard Hunter, head of markets at Interactive Investor, said that there was a tailwind after better than expected results from Tencent, boosting earnings hopes for the broader corporate sector.