The 10-year Treasury yield fell 7 basis points Thursday to 4.934%, ending an eight-day climb that had carried it to its highest level since 2007, per Treasury data. The pullback came a day after the Federal Reserve's first rate hike since July 2023, a quarter-point move markets had spent two weeks pricing in.
That reversal carried through to gains in stocks, gold, and the dollar's biggest movers.
Stocks reversed Wednesday's post-announcement slide. The S&P 500 gained 1.14% to 7,637.72, the Nasdaq Composite rose 1.69% to 26,418.30, and the Dow added 0.62% to 51,779.85, per closing exchange data.
A one-day round trip like this, a hike-day drop then a next-day surge, is rare outside Fed turning points.
Falling yields did the work: every basis point the 10-year gave back made future earnings look cheaper again. That link cuts both ways heading into today's data.
The hike was unanimous: 25 basis points, lifting rates to 3.75% to 4.00%, the first increase since July 2023.
Chair Kevin Warsh called inflation "too high for too long." The dot plot backed him, with sixteen of eighteen officials penciling in at least one more quarter-point move before year end.
That skew is why the 2-year yield touched a 52-week high before easing 5.4 basis points to 4.673%. The short end still prices in more tightening than yesterday's rally suggested.
Falling yields gave growth stocks the most room to run. Technology led the rally, up 2.25%, with chipmakers doing most of the work: Micron, AMD, and Intel each jumped more than 5%, exchange data showed.
Financials slipped 0.09% and communications services fell 0.58%, the only sectors in the red. That divide carries into today's session, where chip-sensitive names carry the most rate risk.
That narrow leadership is a hallmark of hike-relief rallies, not broad conviction.
The same yield pullback that lifted equities also weighed on the dollar. Gold was the day's standout, climbing 2.1% to about $4,347 an ounce.
The greenback lost ground to the Australian and New Zealand dollars, the yen, and the franc. WTI crude fell to $100.70, down about 1.7%, on reports that Saudi Arabia is routing extra barrels through ship-to-ship transfers off Oman.
That pairing, a softer dollar and cheaper oil, raises the stakes for today's industrial production report at 8:15 a.m.
Industrial production and capacity utilization post at 8:15 a.m. ET, with production expected up 0.3% for August.
The Conference Board's leading index follows at 9 a.m., expected up 0.2% for August.
Fed Governor Michelle Bowman speaks at 8:30, followed by Kansas City's Jeff Schmid at 10:45. Both will be parsed for how firmly they back the dot plot's call for one more hike.
A soft production number would reinforce yesterday's relief rally. A hot one would undercut it, sending the 2-year back toward its 52-week high.
