U.S. equities rebounded sharply on September 17, 2026, one day after the Federal Reserve's first interest rate increase since July 2023 sent stocks and bonds sharply lower. Chair Kevin Warsh's Federal Open Market Committee lifted the benchmark rate by a quarter point to a range of 3.75% to 4%, and investors spent the following session reassessing the balance between persistent inflation and still resilient growth. Falling oil prices and a pause in the recent climb in Treasury yields helped restore risk appetite, particularly in the technology and semiconductor shares that had led the prior day's declines, as major indexes clawed back much of what had been lost.

Fed Hikes Rates and Signals More to Come

The FOMC voted 12-0 on September 16 to raise the federal funds rate to 3.75%-4%, its first increase in more than three years. Warsh told reporters that inflation has remained too high for too long, and pointed to ongoing tension in the Middle East as a factor in the committee's decision. Updated projections showed 16 of 18 policymakers expect at least one more increase before year end, with four anticipating two, lifting the median 2026 rate forecast to a range of 4.1% to 4.4%. Officials also raised their inflation outlook, with core PCE now projected at 3.4% for 2026, up from 3.3% previously.

Indexes Recover Losses in a Broad Rally

The S&P 500 closed up 85.90 points, or 1.14%, at 7,637, while the Dow Jones Industrial Average added 317.95 points, or 0.62%, to finish at 51,779. The Nasdaq Composite outperformed with a gain of 439.87 points, or 1.69%, closing at 26,418. Technology shares led the advance, rising 2.25% as a sector, while only communication services and financials closed lower among the eleven S&P sectors. The rally recovered a large share of the ground lost during the prior session's post-decision selloff, as traders concluded the hike itself was less alarming than initially feared.

Chipmakers Lead as AI Spending Worries Ease

A closely watched index of semiconductor shares climbed roughly 3% on the day, with Micron and Intel among the strongest performers in the broader market. The move came as concerns about a slowdown in artificial intelligence capital expenditure showed signs of easing, drawing investors back into names most exposed to that theme. Chip stocks had been among the hardest hit in the prior day's selloff, and their rebound became a key driver of the Nasdaq's outperformance relative to the Dow and the broader S&P 500 on September 17.

Oil Slides, Gold Holds Near Record Levels

Brent crude settled down $2.92, or 2.7%, at $105.83 a barrel, while West Texas Intermediate fell $3.40, or 3.2%, to $102.43, as signs that Middle East supply disruptions were easing outweighed the impact of the Fed's hawkish tilt. Lower energy costs reinforced optimism that inflation pressures could moderate even as policymakers signalled further tightening ahead. Gold edged higher to trade near $4,310 an ounce, holding close to record territory as investors weighed higher interest rates against continued geopolitical risk and a softer dollar.

Daily market analysis by BCM Markets.