Equities Surge as Oil Decline Drags Yields Lower, Easing Inflation Fears

The S&P 500 Index ($SPX) (SPY) advanced 0.91%, the Dow Jones Industrial Average ($DOWI) (DIA) rose 0.45%, and the Nasdaq 100 Index ($IUXX) (QQQ) climbed 1.31%. E-mini S&P futures (ESU26) gained 0.91%, while September E-mini Nasdaq futures (NQU26) added 1.35%.

Stock indexes rallied sharply as declining oil prices alleviated inflation concerns and pulled bond yields lower. West Texas Intermediate crude fell more than 2% on indications that Middle East supply disruptions are easing, bolstering confidence that inflation can remain contained. The 10-year Treasury note yield dropped 5 basis points to 4.96%. Yields also retreated after the Federal Reserve’s 25-basis-point rate hike on Wednesday reassured investors of the central bank’s commitment to taming inflation.

U.S. economic data presented a mixed picture. Weekly initial jobless claims unexpectedly fell by 10,000 to an eight-week low of 196,000, signaling a stronger labor market than the anticipated increase to 207,000. However, August housing starts unexpectedly dropped 2.6% month-over-month to 1.275 million units, missing expectations for a rise to 1.320 million. Building permits, a proxy for future construction, declined 2.7% to 1.394 million, below the 1.408 million forecast. The September Philadelphia Fed Business Outlook Survey fell 9.6 points to 37.8, though this was better than the expected 32.1.

October WTI crude oil futures (CLV26) slid more than 2% as supply fears receded. On Wednesday, U.S. Energy Secretary Wright noted that 18 million barrels of crude and refined products transited the Strait of Hormuz on Tuesday, easing global supply concerns. Additionally, Saudi Arabia announced plans to restore roughly half the capacity of the East-West pipeline within days following its shutdown last week due to drone strikes.

Crude prices had surged to a 3.75-month high on Tuesday amid persistent Middle East supply disruptions. Last Friday, Saudi Arabia closed a major pipeline following attacks, disrupting a key route bypassing the Strait of Hormuz. The East-West pipeline, which transports 7 million bpd, was shut after threats from Houthi rebels. The pipeline moves oil from the Persian Gulf to the Red Sea for tanker loading. Saudi Arabia informed OPEC last Thursday that its August crude production fell to 6.238 million bpd, the lowest since 1990.

Markets are pricing in a 51% probability of a 25-basis-point Fed rate hike at the next FOMC meeting on October 27-28.

Overseas equity markets were mixed. The Euro Stoxx 50 rose 1.08%, China’s Shanghai Composite closed down 0.41%, and Japan’s Nikkei 225 Stock Average gained 0.33%.

Interest Rates

December 10-year T-notes (ZNZ6) climbed 12 ticks. The 10-year T-note yield fell 6.4 basis points to 4.959%. Treasuries advanced as the 2% drop in WTI crude eased inflation expectations. Wednesday’s 25-basis-point rate hike also bolstered confidence that Fed Chair Warsh will act decisively to contain inflation, reinforcing the Fed’s credibility and independence.

Gains in Treasuries were capped by the sharp rally in equities, which reduced safe-haven demand for government debt. Additionally, the unexpected decline in weekly jobless claims to an eight-week low signaled labor market strength that is hawkish for Fed policy.

European government bond yields moved lower. The 10-year German bund yield declined 1.7 basis points to 3.491%. The 10-year UK gilt yield fell to a one-week low of 5.207%, down 7.2 basis points to 5.224%.

Eurozone August CPI was revised lower to 3.2% year-over-year from the previously reported 3.3%. Core CPI was unrevised at 2.4% year-over-year.

As expected, the Bank of England held its benchmark interest rate at 3.75% on a 6-3 vote. The BOE stated there has been “little evidence so far of material second-round effects in price and wage setting” and scrapped plans to sell long-dated gilts as part of its quantitative tightening program.

BOE Governor Andrew Bailey said the global energy shock has had a limited effect on UK prices and wages thus far, but warned that “the longer the volatility persists, the bigger the impact it will have on inflation, and the more likely it is we will need to raise the Bank rate.”

Markets are discounting a 51% chance of a 25-basis-point ECB rate hike at the central bank’s next meeting on October 29.

US Stock Movers

Chipmakers and AI-related stocks led the broader market higher. Marvell Technology (MRVL) surged over 7% to top the Nasdaq 100 gainers, while ARM Holdings (ARM) jumped more than 6%. SanDisk (SNDK), Intel (INTC), and Micron Technology (MU) each rose over 5%, and Advanced Micro Devices (AMD) advanced more than 3%. Seagate Technology (STX), Broadcom (AVGO), Qualcomm (QCOM), and Western Digital (WDC) all gained over 2%.

Most “Magnificent Seven” technology stocks climbed, providing underlying support. Nvidia (NVDA) rose over 2%, while Amazon.com (AMZN), Microsoft (MSFT), and Tesla (TSLA) each gained more than 1%. Alphabet (GOOGL) added 0.91%. Conversely, Meta Platforms (META) slipped 0.80% and Apple (AAPL) edged down 0.07%.

Generac Holdings (GNRC) soared over 22% to lead the S&P 500 after agreeing to supply up to $8 billion worth of generators for Amazon.com’s data centers and issuing a warrant to Amazon for an equity stake.

Vicor Corp. (VICR) rallied over 15% after announcing a non-exclusive Vertical Power Delivery license grant to a new original equipment manufacturer.

Qiagen NV (QGEN) rose over 2% following a Manager Magazin report that TPG and Bain Capital are among potential bidders for the company.

Fluence Energy (FLNC) plunged over 16% after cutting its full-year revenue forecast to $2.4 billion from a previous range of $2.9 billion to $3.1 billion, well below the $3 billion consensus.

CoreWeave (CRWV) dropped over 4% to lead Nasdaq 100 decliners after announcing an at-the-market offering program for up to 35 million Class A common shares.

Paramount Skydance Corp. (PSKY) fell over 3% after Barclays reinstated coverage with an underweight rating and an $8 price target.

Pegasystems (PEGA) declined over 3% after JPMorgan Chase downgraded the stock to neutral from overweight.

Earnings Reports (9/17/2026)

American Resources Corp. (AREC).

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