US stocks rebound as 10-year yield falls below 5%

The 10-year Treasury yield fell to 4.951% after touching 5.041% earlier in the week, a level not seen since 2007. That drop came as traders reassessed how aggressive the Fed may ultimately be. The central bank’s dot plot still showed a divided committee, with eight of 18 officials seeing rates 50 basis points higher by the end of 2027, six penciling in one more hike, and only one projecting cuts. But the market response suggests investors are increasingly convinced the tightening cycle is closer to its end than to a fresh acceleration.

That shift is important for the real economy, too. When Treasury yields retreat, borrowing costs for companies, households and the government tend to ease at the margin. The move also helps explain why rate-sensitive corners of the market found support: money managers are less likely to rotate aggressively out of stocks when the return on “safe” assets starts slipping back from crisis-like levels.

There were a few other tailwinds. Brent crude fell 1.1%, which helps reduce inflation pressure and can improve the outlook for consumer spending. Weekly jobless claims also came in better than expected, pointing to a labor market that remains resilient even as rates stay elevated. Together, that combination suggests the economy is slowing enough to keep inflation in check, but not so sharply that recession fears are taking over.

Growth stocks led the rebound, and for good reason. Lower yields are especially helpful for companies whose profits are expected further out in the future. Nvidia rose after CEO Jensen Huang said he expects chip sales to double in 2027, while Intel jumped on reports it is in talks with SK Hynix to produce chips in the U.S. Marvell, Micron and Super Micro Computer also advanced, underscoring how quickly investors turn back to the AI trade when the bond market stops squeezing valuations.

Alphabet got an added boost after Evercore lifted its price target to $450 from $420, a reminder that investors are still willing to pay for dominant franchises when the macro backdrop is a little less hostile.

For long-term investors, the message is straightforward: the market is still living with higher rates, but every move below 5% on the 10-year gives equities a better chance to breathe. That does not mean the volatility is over. It does mean the pressure from bonds may be less one-way than it looked during the yield spike.

If you invest for the next three to 10 years, this is the kind of backdrop that rewards patience over panic. Rate fears can knock valuations around, but they do not erase the compounding power of durable businesses, especially in AI, cloud and semiconductors. For now, SPY and QQQ look worth keeping on the watchlist as investors wait to see whether Treasury yields can stay below 5% and whether the Fed’s next messages sound less punitive.