Treasury yields drop 10 bps as equities rally, semis surge 6.8%

The S&P 500 rose more than 1.6% and the Nasdaq jumped 2.1% after 5- to 10-year Treasury yields dropped 10 basis points to fresh session lows. The Dow Jones Industrial Average added 895 points, or 1.8%, while the Nasdaq 100 climbed 2.9% and the small-cap Russell 2000 also participated in the advance. The rally snapped a three-day losing streak for the major indexes.

The move marked a sharp reversal from the prior week, when a stronger-than-expected May jobs report — 172,000 jobs added versus the 80,000 consensus — pushed the 10-year yield to 4.55% and triggered a 4.2% Nasdaq selloff on June 5. That session marked the worst weekly performance for the Nasdaq since April 2025 and the S&P 500's worst since May 2025. "Any hopes of a Fed rate cut have effectively been eliminated with this morning's strong jobs report," Ronald Temple, chief market strategist at Lazard, said at the time. The CME FedWatch tool had priced in roughly a 50% chance of a rate hike at the Fed's late-October meeting, up from 34% a day before the data.

Thursday's action told a different story. The Philadelphia Semiconductor Index soared 6.8%, recovering much of the ground lost in the prior week's rout, when Broadcom fell 8% and peers including Arm Holdings, Marvell Technology and Advanced Micro Devices dropped between 11% and 17%. Intel, which had fallen about 10% during the prior week after a record rally, also rebounded. The S&P 500 Biotech Index added 3.1%, reflecting broad risk appetite beyond just technology. The S&P 500 Information Technology sector led the advance, with only four of 73 components in negative territory.

The yield decline removed a key headwind for rate-sensitive growth names. The 10-year yield retreated from the 4.55% level hit after the jobs report, though it remained above the 4.47% pre-data print. The 2-year yield also declined in sympathy. The U.S. dollar index edged lower, providing additional support for equities, while gold futures steadied after falling 3.6% to $4,345 an ounce on June 5.

Breadth was strong. Advancers outpaced decliners by a wide margin on the New York Stock Exchange, and trading volume exceeded the 20-day average as institutional buyers rotated back into technology and growth names. The VIX declined in tandem with the rally, retreating from the elevated levels seen during the June 5 selloff and signaling a return of risk appetite after the prior week's spike.

The rally's sustainability hinges on the next inflation data release and any escalation in the Iran conflict, which has kept oil prices elevated. West Texas Intermediate crude traded near $90 a barrel, down from recent peaks but still well above pre-conflict levels that had pushed the national average gas price to $4.24 a gallon. A sustained drop in yields would require either softer economic data or a clear signal from the Federal Reserve that rate hikes are off the table — neither of which is guaranteed given the labor market's reacceleration and the ongoing geopolitical uncertainty.

This article is for informational purposes only and does not constitute investment advice.