The 10-year Treasury yield touched 4.818% on Wednesday, its highest level since October 2023.
It settled at 4.79%, matching Tuesday's peak. Yesterday's equity rally only began once the yield backed away from that high.
The long end carried the move. The 30-year closed at 5.26% and the 2-year at 4.38%, a spread of 88 basis points.
Futures now price a 66% chance of a Fed hike this month, up from roughly 40% a week ago. Gold recovered above $4,360 late in the session as the long end retreated, after touching a near one-month low earlier.
Today's ISM services report is the next input into that 66%.
The S&P 500 rose 0.46% to 7,666.60 and the Nasdaq added 0.45% to 26,217.83. The Dow gained 295.07 points, or 0.56%, to close at 53,061.95.
All three snapped a three-day losing streak. Nvidia rose 3.12% and led the Dow.
The Russell 2000 outperformed, up 1.13% to 2,953.17. Small caps need the yield relief to hold, which makes them the cleanest tell this morning.
WTI settled near $90.72, up 0.56%, at a fresh six-week high. Brent finished 1% higher in a volatile session.
Crude has gained about 13% in a month. That is the inflation channel behind the repricing in rates.
Traders are weighing Middle East supply disruption against evidence that barrels keep reaching the market. Any further gain keeps the prices-paid line of today's ISM report in focus.
Private payrolls rose 38,000 in August, the weakest month since January and short of the 47,000 consensus.
The Beige Book described growth as modest and flagged rising concern about the Iran war's effect on prices. Soft hiring is no longer pulling rate expectations down, because oil is landing on the other side of the mandate.
Initial jobless claims arrive at 8:30 a.m. ET, with consensus near 205,000 against 203,000 last week. The July trade balance lands at the same time, expected at negative $71.2 billion.
Revised second-quarter unit labor costs, seen at 1.8%, are the 8:30 release with the clearest rate implication.
ISM services follows at 10:00 a.m., consensus 54.5 against 54.1. A firm print would push hike odds back toward this week's highs.
The 10-year eased to about 4.74% in overnight trading after Governor Waller said he could support holding the policy rate steady. Friday's August employment report at 8:30 a.m. settles the argument.
