US futures climb after Fed takes a hawkish turn on inflation

U.S. futures are pointing to a rebound for markets Thursday following the Federal Reserve’s first interest rate hike in three years.

The quarter of a percentage point increase Thursday brings the Fed’s key rate to a target range of 3.75%-4.00% as it attempts to control inflation that’s remained stubbornly high. The rate hike could result in higher borrowing costs for mortgages, auto loans and credit cards. In a set of quarterly projections, the Fed also signaled its rate-setting committee could raise it a second time to 4.1%.

While U.S. stock market indices mostly declined following the Fed's announcement, they are looking to recover some ground on Thursday.

Futures for the S&P 500 rose 0.8%, while those for the Dow Jones Industrial Average gained 0.7%. Nasdaq futures climbed 1.1%.

Following the Fed’s announcements, the two-year U.S. Treasury yield slipped to 4.72% on Thursday. The yield on the 10-year Treasury remained near 5.00%.

Government bond yields have remained higher since the start of the war in Iran as the war-driven energy shock adds to inflationary pressure while investors also worry about growing U.S. national debt.

The U.S. dollar fell Thursday to 155.64 Japanese yen from 156.26 yen. The euro was trading at $1.1478, up from $1.1465.

Meanwhile, oil prices are dropping as there's still limited oil flows in the Strait of Hormuz, the narrow waterway crucial for global oil transport. Saudi Arabia’s closure of a key oil pipeline also adds to oil supply pressure as it moves to repair the pipeline.

Brent crude, the international standard, traded 2.2% lower at $103.48 a barrel on Thursday, but still well above the around $72 per barrel in late February before the war. Benchmark U.S. crude declined 1.7% to $100.65 a barrel.

Investors are also waiting on some economic data Thursday, including weekly jobless claims. Freddie Mac will also report on this week's average U.S. mortgage rates. Last week the mortgage buyer reported that the benchmark 30-year fixed rate mortgage rose to 6.76% from 6.71% a week earlier. It was the third consecutive week that mortgage rates climbed.

In Europe, Britain's FTSE 100 rose 0.6% to 10,751.79. France's CAC 40 advanced 0.3% to 8,166.18, while Germany's DAX climbed 0.5% to 25,667.03. Asian markets were mostly lower.