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Treasury Yields Retreat, Sending Stocks Higher

The rise in Treasury yields paused Thursday, helping stocks stage their biggest move higher in weeks.

The benchmark $S&P 500(.SPX)$  advanced 0.6%, and the tech-focused $NASDAQ(.IXIC)$ gained 0.8%, each notching their best day since Sept. 14, and the $DJIA(.DJI)$ edged up 0.3%.

Stocks' gains were fairly broad-based, with utilities the only sector in the S&P 500 to retreat. Materials and communications services led the advancers. A sharp rise in bond yields had punished stocks after the Federal Reserve last week raised its interest-rate forecasts for next year.

The yield on the benchmark 10-year Treasury note slipped to 4.596%, from 4.625% Wednesday , snapping a three-day streak of gains . Yields, which rise when bond prices fall, have recently surged in large part because the economy has remained strong, causing investors to question how soon the Fed will be able to start cutting interest rates.

The three major U.S. indexes remain higher for the year. Still, all three are on track to post losses for the third quarter, which ends Friday.

Rising bond yields can hurt stocks in several ways. Some investors view technology stocks as particularly vulnerable because they tend to be valued based on earnings expected to arrive further in the future, and those profits are worth less when investors can get an improved risk-free return by holding government bonds to maturity.

At the same time, higher bond yields and borrowing costs could cause a recession, which could do greater damage to companies outside the tech sector.

Leah Traub, a fixed-income portfolio manager at Lord Abbett, said she thinks yields could rise further.

$Peloton Interactive(PTON.US)$ shares gained 5.4% after the fitness-equipment company unveiled a partnership with the apparel-maker $Lululemon Athletica(LULU.US)$, ending a turf battle between the companies. Chip stocks also rose. $Advanced Micro Devices(AMD)$  added 4.8%

$CarMax(KMX)$  's shares shed 13% after the used-car retailer reported that revenue declined 13.1% in its quarter ended Aug. 31 compared with a year earlier. While Americans are window-shopping for used cars, sticker shock is keeping them from buying.

The WSJ Dollar Index, which measures the greenback against a basket of currencies, ended a seven-day streak of gains fueled by rising Treasury yields. The dollar weakened as bond yields eased.

The rise in oil markets also paused. The front-month Brent futures contract fell 1.2% to $95.38 a barrel.

Overseas, the pan-continental Stoxx Europe 600 added 0.4%, while major indexes in Asia broadly closed lower. Japan's Nikkei 225 shed 1.5%.

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