Dow rallies 500 points as Treasury yields fall, S&P 500 heads for best day since May: Live updates

Stocks gained Thursday as Treasury yields fell, with investors betting the Federal Reserve could be done raising rates for 2023.

The Dow Jones Industrial Average traded 505 points higher, or 1.5%, steadily gaining higher on the session as yields declined. The Dow is up more than 580 points in two days. The S&P 500 and Nasdaq Composite climbed 1.8% and 1.7%, respectively. The S&P 500 and Dow are on track for their biggest weekly gain of the year, putting the broad market index on pace for its best day since May.

The rally was broad-based, with all 11 S&P 500 sectors trading in positive territory. Gains were led by real estate and consumer discretionary, two sectors hit hard earlier in the year amid worries about higher rates.

Bond yields declined, with the 10-year Treasury yield dropping by about 11 basis points at 4.682%. That comes after the benchmark yield topped 5% last month.

Data released Thursday morning showed easing inflation and a slowing labor market, adding to investor confidence the Federal Reserve could be done raising rates. Labor costs unexpectedly dropped in the third quarter, the Labor Department said Thursday. And weekly jobless claims on Thursday ticked higher to 217,000.

The Fed on Wednesday kept interest rates unchanged for a second straight time, unleashing a rally in the Dow of more than 200 points. The S&P 500 and Nasdaq Composite each ended up more than 1%.

“There is a little bit of a follow through from yesterday, and then this morning, we got some of the productivity and unit labor cost numbers, and the unit labor cost numbers are actually negative,” said Megan Horneman, investment chief at Verdence Capital Advisors. “That is adding to some of the relief that maybe we’re getting some of that sticky inflation under control that the Fed has been mentioning.”

To be sure, Horneman is concerned investors may be overly optimistic as Chair Jerome Powell on Wednesday noted he would not rule out a rate increase at the December meeting.

“I think that there still is volatility we’ll see in inflation,” Horneman said. “The one thing that concerns us is that inflation is extremely easy to reignite.”

Tesla and Nvidia led a gain in tech shares Thursday as investors cheered the drop on rates. Apple added almost 2% ahead of its earnings report after the bell.