The S&P 500 Index advanced 0.86% and the Nasdaq 100 Index climbed 1.47% as falling crude oil prices and lower bond yields eased inflation concerns. The Dow Jones Industrial Average gained 0.36% during the session. The rally was supported by signs that supply disruptions in the Middle East are easing, which bolstered hopes that inflation can be kept under control.
WTI crude oil prices dropped more than 1%, reversing a surge to a 3.75-month high earlier in the week. US Energy Secretary Wright noted that 18 million barrels of crude oil and refined products passed through the Strait of Hormuz on Tuesday, alleviating global supply worries. Saudi Arabia indicated it seeks to restore about half the capacity of its East-West pipeline within days following a shutdown caused by drone strikes. That pipeline, which carries 7 million barrels per day, was closed after threats from Houthi rebels. Saudi Arabia had previously told OPEC that its August crude production fell to 6.238 million barrels per day, the lowest level since 1990.
The 10-year T-note yield declined by 6 basis points to 4.95%, while the 10-year breakeven inflation rate fell to a four-week low of 2.304%. These moves followed the Federal Reserve's 25 basis point rate hike on Wednesday, which reassured investors of the central bank's determination to tame inflation. However, gains in Treasuries were limited by the sharp rally in equities, which reduced safe-haven demand, and by a stronger-than-expected labor market report.
US economic data presented a mixed picture for stocks. Weekly initial unemployment claims unexpectedly fell by 10,000 to an eight-week low of 196,000, compared to expectations of an increase to 207,000. In contrast, August housing starts unexpectedly dropped 2.6% month-over-month to 1.275 million, missing forecasts of an increase to 1.320 million. Building permits also fell more than expected, declining 2.7% month-over-month to 1.394 million. The September Philadelphia Fed business outlook survey came in at 37.8, stronger than the expected 32.1, while August pending home sales rose unexpectedly by 0.3% month-over-month.
Chipmakers and AI stocks led the market higher, with Intel up more than 8% to lead gainers in the Nasdaq 100. ARM Holdings Plc and SanDisk rose more than 6%, while Micron Technology and Marvell Technology gained over 5%. Generac Holdings jumped more than 18% after reaching a deal to provide up to $8 billion in generators for Amazon.com's data centers and granting Amazon a warrant for an equity stake. Conversely, Fluence Energy fell more than 15% after cutting its full-year revenue forecast to $2.4 billion from a previous range of $2.9 billion to $3.1 billion.
Overseas markets showed mixed results, with the Euro Stoxx 50 up 0.97% and Japan's Nikkei-225 up 0.33%, while China's Shanghai Composite closed down 0.41%. The Bank of England kept its benchmark interest rate unchanged at 3.75% in a 6-3 vote, stating that there has been little evidence so far of material second-round effects in price and wage setting. Governor Andrew Bailey warned that if energy volatility persists, the impact on inflation could grow, making a rate hike more likely.