Financial Markets                      09/17 16:08

   

   NEW YORK (AP) -- The U.S. stock market rallied to its best day in six weeks 
Thursday after falling oil prices and easing pressure from the bond market 
helped Wall Street reverse many of its moves from the prior day.

   The S&P 500 jumped 1.1% for just its second rise in the last nine days. The 
Dow Jones Industrial Average added 316 points, or 0.6%, and the Nasdaq 
composite climbed 1.7%.

   Stocks got a boost after the price for a barrel of Brent crude oil slid 1% 
to settle at $104.82. That's down from the nearly $110 it reached earlier in 
the week on worries that the war with Iran will keep oil bottled up in the 
Middle East instead of going to customers worldwide.

   Brent is of course still much more expensive than the $72 per barrel that it 
cost earlier this summer, but Thursday's drop helped pull yields lower in the 
bond market and removed some pressure on stocks. The yield on the 10-year 
Treasury fell to 4.93% from 5.01% late Wednesday.

   Higher yields make it more expensive for everyone to borrow money, from the 
U.S. government to people looking to buy houses to businesses wanting to build 
data centers. That in turn slows the economy.

   The Federal Reserve on Wednesday raised the short-term interest rate that it 
controls, the federal funds rate, by a quarter of a percentage point for its 
first hike in more than three years. Officials also signaled they may raise the 
federal funds rate one more time this year as they try to get the nation's high 
inflation under control.

   The signals sent Wall Street on a roller coaster. Stocks initially remained 
higher for the day after the Fed made its announcement Wednesday. They then 
slid sharply before recovering a chunk of the losses before trading ended.

   On the upside for markets, the shift to higher interest rates built 
confidence that the Fed is committed to getting inflation back to its target of 
2%. Questions had begun to bubble earlier about whether it would feel pressure 
from President Donald Trump, who is calling for lower interest rates. And the 
short-term cost of pain for the economy could be worth it if it gets inflation 
under control following years of its staying too high.

   On the downside for markets, higher rates undercut prices for stocks and 
other investments. When investors earn more in interest from bonds, which are 
considered safer investments, they're less willing to pay high prices for other 
investments. That's beyond the slowing effect that higher rates have on the 
economy in hopes of removing fuel for inflation.

   Some reports on Thursday signaled the U.S. economy may be strong enough to 
withstand higher interest rates. One said fewer U.S. workers applied for 
unemployment benefits last week. Another said that manufacturing growth in the 
mid-Atlantic region was stronger than economists expected.

   Fed Chairman Kevin Warsh said Wednesday that a strengthening economy is one 
of the reasons Fed officials moved to raise interest rates after keeping them 
on hold earlier this year.

   He also cited "geopolitics," along with the threat that the increases in 
prices it's causing could filter out and push up inflation elsewhere. That's 
likely a nod to the war with Iran and its effect on oil prices.

   On Wall Street, stocks in the artificial-intelligence industry continued to 
rebound following their worldwide slide on Monday. Nvidia climbed 2.5%, and 
Advanced Micro Devices rose 6.4%.

   That was even though OpenAI disclosed six more reports of "unexpected or 
concerning" behavior in AI models. Leaders of the AI industry over the weekend 
called for a slowdown in development to address safety issues for humanity

   Stocks of several homebuilders also rose, even though a report showed the 
industry broke ground on fewer new homes last month than economists expected. 
The housing industry has been one of the hardest hit by the climb for the 
10-year Treasury's yield, which topped 5% this week for the first time since 
2023 and has pulled mortgage rates higher.

   Thursday's ease in yields helped D.R. Horton rise 1.5%, while PulteGroup 
added 1.1%. Rival Lennar erased an early loss and climbed 1.7% after reporting 
weaker profit and revenue for the latest quarter than analysts expected.

   All told, the S&P 500 rose 85.95 points to 7,637.76. The Dow Jones 
Industrial Average gained 316.14 to 51,778.04, and the Nasdaq composite rallied 
439.87 to 26,418.30.

   In stock markets abroad, indexes rose across much of Europe following a 
weaker finish in Asia.

   London's FTSE 100 climbed 1.2% after the Bank of England decided to keep its 
interest rates on hold.

   ___

   AP Business Writers Chan Ho-him and Michelle Chapman contributed to this 
report.

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