US equities finished marginally higher on Thursday, recovering from an early slide as Treasury yields backed away from levels not seen in more than two decades. The move higher was modest but broad enough to lift all three major benchmarks into positive territory by the closing bell.
The S&P 500 added 0.23% to end at 7,668.82, while the Nasdaq Composite advanced 0.07% to 26,871.60. The Dow Jones Industrial Average rose 29.84 points, or 0.06%, to close at 50,935.89.
The session's turning point came in the bond market. The benchmark 10-year Treasury yield briefly touched 5.342%, its highest reading since April 2002, before buyers stepped back in and pushed yields lower. The 30-year yield also notched a 24-year peak before reversing. By the close, the 10-year and 30-year yields were down 6 and 4 basis points respectively, while the two-year yield dropped nearly 10 basis points.
The pullback in short-dated yields reflected shifting expectations for Federal Reserve policy. The two-year note, which is especially attuned to the outlook for the federal funds rate, was on pace for its steepest one-day decline since August 2025.
Inflation worries persist despite softer data
Stocks had opened under pressure after fresh economic releases pointed to a still-resilient labour market and lingering price pressures. Weekly initial jobless claims came in at 197,000, below the 200,000 economists had forecast in a Reuters survey, arriving just ahead of Friday's monthly payrolls report.
Separately, the Institute for Supply Management's manufacturing PMI slipped to 54.5 in September from 54.6 in August, but the survey also showed input prices climbing, reinforcing concerns that inflation may prove sticky.
Even so, traders trimmed bets on another Fed hike. Wednesday's cooler-than-expected inflation reading had already dampened expectations, and markets were pricing a 28.2% chance of at least a 25-basis-point increase at the October meeting, down sharply from 68.6% a week earlier, according to CME FedWatch data.
Fed Vice Chair Philip Jefferson suggested the central bank could afford to be patient before tightening again, following September's quarter-point move. Minneapolis Fed President Neel Kashkari struck a more hawkish tone, saying further increases may be necessary to cool the economy into 2027, though he remained unsure whether the next step should come this month.
Energy leads as crude rallies
Oil prices added another layer of uncertainty for investors weighing inflation risks and Middle East developments. Brent crude settled more than $4 higher after China suspended fuel exports, stoking worries about tighter global supplies. WTI gained 1.6% to trade above $91 a barrel as markets waited for the next move from the Trump administration in the Iran conflict.
The jump in crude lifted the S&P 500 energy sector by nearly 2%, making it the best performer among the index's 11 major groups. Technology also fared well, gaining close to 1%, with software shares advancing after Accenture's results and outlook.
Micron Technology stayed in the spotlight after posting strong results and a better-than-expected revenue forecast. The chipmaker also disclosed $32 billion in customer commitments under supply agreements, underpinning continued interest in the AI trade.
This article is for informational purposes only and does not constitute financial advice.
