10-Year Treasury Yield Pulls Back From 5% as Stocks and Bonds Rebound After Fed Rate Hike

The 10-year U.S. Treasury yield retreated from the psychologically critical 5% level on September 17, snapping an eight-day rising streak, as stocks and bonds staged a broad recovery following the prior session's steep selloff. The yield, which had climbed to 5.016% after the Federal Reserve raised interest rates for the first time since 2023 and Chairman Kevin Warsh flagged persistent inflation risks, eased roughly 5 basis points to hover near 4.96%. The 2-year Treasury yield had also spiked, rising more than 7 basis points to 4.738% after the Fed decision before similarly pulling back.

Equities bounced sharply, with the S&P 500 rising about 1.14% to 7,637.76, the Nasdaq gaining 1.69% to 26,418.30, and the Dow adding 0.61% to 51,778.04. A gauge of chipmakers climbed roughly 3% as rate-sensitive technology shares recovered. The prior session had seen the Dow shed 600 points as the Fed's hawkish posture rattled investors.

Falling oil prices amplified the relief in bond markets. Brent crude slipped toward $104 a barrel and U.S. crude fell about 1.31% to $101.09, easing inflation expectations and reducing upward pressure on yields. The EUR/USD pair was closely watched against the 5% yield threshold, with analysts noting that a sustained move back above that level would likely cap the euro's recovery against the dollar. Gold edged up while the dollar wavered as traders reassessed the pace of further Fed tightening.

With the Fed now projecting a second rate hike this year, market strategists are recalibrating portfolios toward value-oriented assets and away from growth stocks most sensitive to high discount rates. Analysts compared the relative performance of growth-focused funds like the Invesco QQQ Trust against value ETFs, noting that a sustained 5% yield environment historically pressures long-duration equities.