The major averages recovered from a broad morning retreat on Thursday, with a sharp reversal in Treasury yields helping stocks regain their footing and strength across technology, semiconductors, and other AI-related names providing additional support. The S&P 500 (+0.2%) finished modestly higher, while the Nasdaq Composite (flat) and DJIA (flat) ended little changed. The recovery was more pronounced across the broader market. The Russell 2000 (+0.5%) and S&P Mid Cap 400 (+1.1%) both rebounded from morning losses and outperformed the major averages, marking a notable improvement in participation as the session progressed.

Stocks opened with modest gains before selling pressure quickly broadened, sending the major averages to their session lows late in the morning. Treasury yields were 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 yields reversed lower across the curve.

The retreat helped stocks recover their morning losses and also encouraged better participation beneath the surface. Fed Vice Chair Phillip Jefferson, a voting FOMC member, provided some additional encouragement for expectations that the Fed will leave rates unchanged at its October meeting. Jefferson said future policy adjustments should be determined by trends in the data, the evolving outlook, and the balance of risks, adding that policymakers will need to come to their own judgment and that doing so "may take more time." The CME FedWatch Tool now assigns a 76.2% probability to the Fed keeping rates steady at the October meeting, up from 62.4% yesterday.

Technology stocks provided another important source of support. The information technology sector (+0.8%) finished among five S&P 500 sectors in positive territory, while the PHLX Semiconductor Index gained 1.6%. Micron (MU 1097.39, +32.28, +3.03%) was a notable contributor to the semiconductor group's strength after reversing an early post-earnings decline and finishing higher. The turnaround followed an initially cautious response to the company's better-than-expected Q4 results and strong Q1 guidance, with enthusiasm surrounding AI-driven memory demand ultimately helping the stock find its footing.

Accenture (ACN 212.73, +29.36, +16.01%) was another standout after beating Q4 expectations, as its results and stronger bookings increased confidence that AI is becoming a growth driver rather than a disruption risk for the company. Synopsys (SNPS 490.54, +55.60, +12.78%) also ranked among the best-performing S&P 500 components following its Investor Day.

Strength across AI-infrastructure names extended beyond the technology sector, helping the industrials sector (+1.0%) finish among the day's leaders.

The utilities sector (+0.6%) also benefited from the reversal lower in Treasury yields, while the financials sector (+0.2%) also finished modestly.

The energy sector (+1.9%) led the standings as crude oil extended its recent advance. WTI crude settled $2.48 higher (+2.7%) at $93.02 per barrel amid continued geopolitical uncertainty.

At the other end of the standings, the communication services sector (-1.2%) and health care sector (-1.3%) were clear laggards. Alphabet (GOOG 334.93, -5.81, -1.71%)) weighed on the communication services sector 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 pressure as investors digested news that its merger with Warner Bros. Discovery (WBD 30.95, +0.00, +0.00%) is expected to close on October 6.

Ultimately, the session featured a meaningful improvement from the broad weakness seen during the morning. The reversal lower in Treasury yields relieved some of the pressure that has recently weighed on equities, while continued strength across semiconductors, technology, and AI-infrastructure stocks helped the S&P 500 finish higher. The outperformance of small- and mid-cap stocks also represented a welcome improvement in participation after the narrow leadership that characterized much of September, although pronounced weakness in the communication services and health care sectors kept the S&P 500's advance relatively modest, leaving the major averages firmly lower heading into Friday's session.

U.S. Treasuries had a volatile session, with yields ultimately settling near their lows for the day even though oil prices traded higher. The 2-year note yield settled down 10 basis points to 4.79%, and the 10-year note yield settled down six basis points to 5.24%.

• Nasdaq Composite: +15.6% YTD
• Russell 2000: +13.1% YTD
• S&P 500: +12.0% YTD
• S&P Mid Cap 400: +9.9% YTD
• DJIA: +6.0% YTD

Reviewing today's data:

• For the week ending September 26, initial jobless claims fell by 1,000 to 197,000 (Briefing.com consensus: 200,000). Continuing jobless claims for the week ending September 19 decreased by 11,000 to 1.701 million.
  • The key takeaway from the report remains the same: layoff activity continues to run at low levels that reflect a solid demand environment.
• Sep S&P Global U.S. Manufacturing PMI - Final 55.9 (Briefing.com consensus 55.3; Prior 57.0)
• Construction spending increased 0.9% month-over-month in August (Briefing.com consensus: 0.3%) following a 0.1% decline in July. On a year-over-year basis, construction spending was down 1.7%.
  • The key takeaway from the report was the strength seen in private construction, which included solid increases for both residential and nonresidential spending.
• The ISM Manufacturing Index decreased to 54.5% in September (Briefing.com consensus: 55.2%) from 54.6% in August. The dividing line between expansion and contraction is 50.0%, so the September figure suggests manufacturing activity expanded in September from the prior month but at a slightly slower pace.
  • The key takeaway from the report is that it showed an ongoing expansion in manufacturing activity that was accompanied by a faster acceleration in prices paid, which will continue to foment concerns about pass-through effects for customers.
• 09/26 EIA Natural Gas Inventories +64 bcf (Prior +53 bcf)