US Stocks Bounce Back as Bond Yields Slip From Highs

US stocks climbed higher in choppy trade after a sharp drop in Treasury yields helped reverse an early market slump. The S&P 500 fell to a two-week low in early trading before rebounding. Economic reports continued to show a strong job market. The Labor Department reported that weekly initial jobless claims dropped to 197,000, which came in below the 200,000 forecast made by economists polled by Reuters. Meanwhile, the Institute for Supply Management stated that its manufacturing PMI dipped to 54.5 last month from 54.6 in August and showed a jump in input prices.

Market Moves and Sectors

The benchmark 10-year Treasury note hit a 24-year high before retreating as buyers stepped in. Federal Reserve Vice Chair Philip Jefferson suggested the central bank may be patient before raising rates again following a 25 basis point hike in September. However, Minneapolis Federal Reserve President Neel Kashkari stated he expects further rate increases to restrain the economy going into 2027. Markets are currently pricing in a 28.2% chance for a rate hike of at least 25 basis points, down from 68.6% a week earlier. Oil prices also pushed higher after China suspended fuel exports. Brent crude jumped nearly 5% a barrel, helping boost the S&P 500 energy index by almost 2% as the best performing sector. Technology shares gained 0.6% and software shares rallied 1.2%. Accenture shares surged 17% to hit a 7-1/2 month intraday high after the firm forecast full-year revenue growth above estimates. Constellation rose after signing a 20-year Amazon power deal, while Micron Technology shares slipped about 1.7% despite posting a better-than-expected revenue forecast and $32 billion in customer commitments under supply agreements. At the close, the Dow Jones Industrial Average edged up 3.17 points, or 0.01%, to 50,910.42. The S&P 500 gained 18.58 points, or 0.24%, to 7,670.12, and the Nasdaq Composite climbed 66.63 points, or 0.25%, to 26,927.69. Advancing issues outnumbered decliners by a 1.04-to-1 ratio on the NYSE and a 1.02-to-1 ratio on the Nasdaq.

Context

Stock markets often react strongly to shifts in government bond yields and statements from central bank officials because these factors directly influence borrowing costs for businesses and consumers. When bond yields rise rapidly, investors tend to pull money out of equities due to higher returns available on safer debt assets.