Stocks Rebound as Treasury Yields Reverse Lower and AI Trade Regains Momentum

The major averages recovered from a broad morning retreat on Thursday as a sharp reversal in Treasury yields helped equities regain their footing, while renewed strength across technology, semiconductors, and AI-related stocks provided additional support. The S&P 500 gained 0.2%, while the Nasdaq Composite and Dow Jones Industrial Average finished essentially unchanged.

The recovery was more pronounced beneath the large-cap indexes. The Russell 2000 advanced 0.5%, while the S&P MidCap 400 climbed 1.1%, with both rebounding sharply from morning losses. Their outperformance represented a notable improvement in market participation following the increasingly narrow leadership that characterized much of September.

Stocks opened with modest gains before selling pressure quickly broadened, sending the major averages to their session lows late in the morning. Treasury yields represented a significant early headwind, particularly at the long end of the curve, as generally solid economic data pushed longer-dated yields back toward their overnight highs.

The tone improved considerably as the session progressed, however, as Treasury yields reversed lower across the curve. The retreat in yields relieved some of the valuation pressure that has recently weighed on equities and helped trigger a recovery across both the major averages and the broader market.

Fed Vice Chair Philip Jefferson also provided some encouragement for expectations that policymakers could leave interest rates unchanged at the October FOMC meeting. Jefferson emphasized that future policy adjustments should depend on incoming data, the evolving economic outlook, and the balance of risks, adding that reaching an appropriate judgment “may take more time.”

Rate expectations shifted accordingly. The CME FedWatch Tool indicated a 76.2% implied probability that the Federal Reserve will leave rates unchanged at its October meeting, up from 62.4% on Wednesday. The repricing provided an additional tailwind as the session progressed.

Technology stocks represented another important source of support. Information technology (+0.8%) finished among five S&P 500 sectors in positive territory, while the PHLX Semiconductor Index gained 1.6%, extending the strong momentum that made semiconductors one of September’s standout groups.

Micron (MU 1097.39, +32.28, +3.03%) was a notable contributor to semiconductor strength after reversing an early post-earnings decline and finishing 3% higher. Investors initially responded cautiously to the company’s better-than-expected fiscal fourth-quarter results and strong first-quarter guidance, but enthusiasm surrounding AI-driven memory demand ultimately helped shares regain momentum.

The reversal was particularly notable given the substantial expectations already embedded in Micron’s valuation following the semiconductor group’s powerful September rally. Continued strength in memory pricing and demand from AI infrastructure remain central to the company’s growth outlook as capital expenditures increase.

Accenture (ACN 212.73, +29.36, +16.01%) delivered one of the session’s most dramatic moves, surging 16% after exceeding fiscal fourth-quarter expectations. Stronger bookings increased investor confidence that artificial intelligence is developing into an important growth driver for the company rather than representing primarily a disruption risk.

Synopsys (SNPS 490.54, +55.60, +12.78%) was another standout, jumping nearly 13% following its Investor Day. Strength across AI-infrastructure names extended beyond the technology sector and helped industrials (+1.0%) finish among the day’s strongest groups.

Utilities (+0.6%) also benefited from the reversal lower in Treasury yields, while financials (+0.2%) managed a modest advance.

Energy (+1.9%) led the S&P 500 sector standings as crude oil extended its recent rebound. WTI futures rose $2.48, or 2.7%, to settle at $93.02 per barrel amid continued geopolitical uncertainty, providing a strong tailwind for oil and gas shares.

At the opposite end of the market, communication services (-1.2%) and health care (-1.3%) were the clear laggards. Alphabet (GOOG 334.93, -5.81, -1.71%) weighed on communication services after reversing an opening gain that followed the unveiling of Gemini 4 Argon.

Paramount Skydance (PSKY 9.34, -0.99, -9.58%) also remained under significant pressure as investors digested developments surrounding its pending merger with Warner Bros. Discovery (WBD 30.95, unchanged), which is expected to close on October 6.

Thursday’s session ultimately represented a meaningful improvement from the broad weakness seen during the morning. The reversal lower in Treasury yields removed some of the pressure that has recently challenged equity valuations, while continued strength across semiconductors, technology, and AI-infrastructure stocks helped the S&P 500 return to positive territory.

Perhaps more encouraging was the improvement in participation outside the largest technology companies. The Russell 2000 and S&P MidCap 400 both outperformed the major averages, offering a welcome contrast to September’s highly concentrated leadership in mega-cap growth, technology, and semiconductor stocks.

The broader picture nevertheless remained mixed. Only five S&P 500 sectors finished higher, and pronounced weakness in communication services and health care limited the large-cap advance. The major averages also remained firmly lower for the week heading into Friday.

Still, Thursday demonstrated that relief from elevated Treasury yields can quickly improve market participation. With expectations for an October Fed pause rising and AI-related stocks continuing to attract substantial investor interest, the interaction between Treasury yields, monetary-policy expectations, and the durability of broader market participation remains central to the near-term outlook.

Our FTinvest 11 model portfolio edged higher by 0.17% to close at 882.21, ending a five-session losing streak and beginning October and the fourth quarter with a modest gain. The advance follows Wednesday’s close at 880.69, which marked the lowest level of the current correction. Despite the rebound, the portfolio remains firmly in correction territory at approximately 19.5% below its all-time closing high of 1,096.33, leaving it close to a 20% drawdown.

FTinvest 11 is now down approximately 4.95% year-to-date. Thursday’s small advance provides a pause following the substantial selling pressure experienced through the second half of September, but leaves the portfolio well below both its start-of-year level and the 1,000 milestone. After September’s approximately 12.6% decline, FTInvest 11 begins the final quarter of 2026 near the deepest point of its current drawdown.