Stock Futures Slip After Rally on Fed Rate Rise

Fed officials penciled in six more interest-rate increases by year’s end, as the central bank moved more aggressively to slow inflation, which is running at a four-decade high.

“The Fed recognized that the hikes will slow growth. The question is now how much will the tightening of the economy slow growth. That’s what markets are looking for,” said Shaniel Ramjee, a multiasset fund manager at Pictet Asset Management. 

Other investors saw the Fed’s move as potentially supportive. Although the central bank’s stance has become more hawkish, it “wants to try to engineer a soft landing, and that’s actually quite a positive outcome for equities,” said

Adrian Zuercher,

the head of global asset allocation at UBS’s chief investment office. 

Mr. Zuercher pointed to signs that the Fed was willing to tolerate inflation overshooting its 2% target—most officials now see core inflation ending the year at 4.1%—as indicating that policy makers were focused on not scuttling the economic recovery.

Stocks had begun to stage a comeback after coming under pressure from the war in Ukraine, surging energy prices from uncertainty about the impact of Western sanctions on Russia’s oil-and-gas industry, and uncertainty about how major central banks would react. Investors said they are focusing on the resumption of cease-fire talks between Ukraine and Russia and more clarity about the Fed’s plans. The S&P 500 is on track for its best weekly performance in over three months. 

The yield on the benchmark 10-year Treasury note edged down to 2.130% from 2.185% on Wednesday, reversing direction after three straight days of rises. Yields rise when prices fall. Selling of shorter-dated bonds, which are more heavily affected by changes in monetary policy, also eased, with the two-year yield declining to 1.934% after climbing for eight trading sessions. 

“A lot of investors suspect that the Fed won’t be able to deliver as much due to reaction of markets and the economy,” said

James Athey,

an investment manager at

Abrdn.

“We could think of this as peak hawkishness.”

Commodity markets still showed signs of stress from the Russia-Ukraine conflict. Oil prices rose, with Brent crude adding 3.2% to trade at $101.12 a barrel. The benchmark was still down around 13% down for the week. 

Investors still have concerns about longer-term energy supply issues, according to SPI Asset Management. The International Energy Agency said in a Wednesday report that sanctions on Russia could create a supply shock. 

The price of gold, a traditional haven asset, climbed 1.5% to around $1,938 a troy ounce. 

The pan-continental Stoxx Europe 600 edged up 0.2%. The Russian stock exchange remained closed and the ruble depreciated 6% against the dollar, trading at around 104 rubles to $1. It has lost 28% of its value since the beginning of the year. 

Chinese shares rallied for a second day, with Hong Kong’s Hang Seng Index advancing more than 7% and the Shanghai Composite Index rising 1.4%. 

Among big Chinese technology companies, shares in

Tencent Holdings

gained more than 6% and

Meituan

surged 16%. Beaten-down property shares also rocketed higher, with

Country Garden Holdings

adding 7%.

Supportive government comments had fueled a huge recovery in Chinese stocks Wednesday after several days of heavy selloffs, with the Hang Seng staging its biggest single-day rally since 2008 and many tech shares jumping more than 30%.

China’s market will likely remain extremely volatile over the next few weeks, partly due to the war in Ukraine, as China relies on Russia for some commodity imports, said Mr. Zuercher at UBS. Extended lockdowns could also reduce company earnings, if China cannot bring its Covid-19 outbreaks under control soon, he added. 

Key equity indexes in Australia and South Korea gained more than 1% in Thursday’s trading, while Japan’s Nikkei 225 surged nearly 3.5%.

Write to Clarence Leong at clarence.leong@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com