U.S. stock futures rebounded Thursday, clawing back part of the previous session’s losses. Futures on the S&P 500 rose about 0.7% in pre-market trading, while Dow Jones futures also pointed higher and Nasdaq-100 contracts advanced.

The bounce followed a bruising Wednesday. The S&P 500 fell 1.12%, the Nasdaq Composite dropped 1.04% and the Dow Jones Industrial Average slid 0.93%, as investors recoiled from a more hawkish-than-expected Federal Reserve. For a refresher on how these benchmarks are built and what they track, see our guide to what stock indexes are.

What changed overnight

The catalyst for Thursday’s rebound came from the Middle East. President Donald Trump signed an interim memorandum of understanding with Iran aimed at extending the regional ceasefire and reopening the Strait of Hormuz, the chokepoint through which roughly a fifth of the world’s seaborne oil passes. Trump cautioned that the memorandum is not yet final, and tankers had not yet resumed transit through the strait as of Thursday morning.

Still, the prospect of restored shipping and renewed Iranian exports sent crude lower. West Texas Intermediate (WTI) crude fell to around $74.56 a barrel, down nearly 2.9% on the day, after climbing above $77 earlier in the week on war-risk fears. Cheaper oil eased one of the inflation pressures that had spooked markets, and Asian equities rallied broadly, with South Korea’s Kospi climbing above 9,000 for the first time, according to CNBC.

The Fed’s hawkish hold still looms

The deeper story for markets remains the Federal Reserve. On June 17, in its first policy meeting under new Chair Kevin Warsh, the Federal Open Market Committee held the federal funds rate steady at 3.50% to 3.75%. The decision itself was widely expected; the surprise was the tone.

According to the Federal Reserve’s June Summary of Economic Projections, nine of 18 policymakers now pencil in at least one rate hike this year, and the median year-end projection for the funds rate rose to 3.8% from 3.4% three months earlier. In other words, rate cuts are no longer the Fed’s base case — a sharp reversal of the easing path markets had priced in. This is the opposite of the gradual policy unwinding many investors had expected; for context on how central banks dial stimulus up and down, see our explainer on tapering and monetary policy tools.

Bond yields jump

The hawkish signal sent Treasury yields sharply higher. The 10-year Treasury yield jumped about 6.9 basis points to 4.497% on Wednesday before steadying near 4.49%. Rising yields lift borrowing costs across the economy and tend to pressure equity valuations — particularly for rate-sensitive growth and technology names, which dominate the major indexes. Investors looking to diversify away from that concentration sometimes turn to broad-market funds that exclude the largest tech weights, such as these S&P 500 ETFs without the Magnificent 7.

What to Watch for the Open

Thursday’s rebound is real but fragile, built on a still-unfinished geopolitical deal rather than a change in the rate outlook. Key things to track into the bell:

  • Treasury yields: whether the 10-year holds above 4.5%. A further climb would cap any equity rally and weigh on tech.
  • Oil and energy stocks: if crude keeps falling on the Iran deal, energy shares may lag even as the broader market gains.
  • Fed commentary: any follow-up remarks from Warsh or other officials that confirm — or soften — the hawkish projections.
  • The durability of the Iran deal: Trump called the memorandum non-final, and no tankers have yet transited the strait. Any breakdown could send oil and volatility straight back up.

For now, the pre-market tone is cautiously positive. But with the Fed leaning hawkish and yields elevated, traders should treat Thursday’s bounce as a relief rally rather than a trend change.