S&P 500 Closes Higher as Treasury Yields Retreat from Multiyear Highs and Rate Hike Odds Collapse

U.S. stocks ended a volatile session higher on October 1 after Treasury yields pulled back sharply from multiyear highs, reversing a selloff that had weighed on equities earlier in the day. The S&P 500 and Nasdaq both gained while the Dow finished roughly flat, with traders closely tracking whipsaw moves in the bond market throughout the session.

A key catalyst for the yield retreat was a signal from Federal Reserve Vice Chair Jefferson hinting at a pause in rate hikes at the October meeting. That commentary sent the odds of a rate hike this month plunging from roughly 70% to 26%, giving risk assets room to recover. The U.S. Treasury also conducted a $6 billion debt buyback during the session, a move that put additional downward pressure on yields.

Bitcoin surged past $85,000 as rate hike expectations collapsed, reflecting the broader repricing of monetary policy risk across asset classes. European sovereign bonds were notably less fortunate, with yields on French, Italian, and Greek debt all sharply higher on the day, underscoring that the volatility in fixed income was a global phenomenon. Options traders flagged utilities as a signal of a potential broader bond market rebound.