Wall Street clawed back most of the ground it lost earlier in the week, with the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite all closing higher Thursday as bond yields retreated a day after the Federal Reserve delivered its first interest-rate increase since 2023. The rally came even as homebuilder Lennar sank to a 52-week low after missing profit estimates and cutting its full-year delivery outlook for the second time this year.
The Dow rose 316.14 points, or 0.6%, to 51,778.04. The S&P 500 gained 1.14% to close at 7,637.76, and the tech-heavy Nasdaq Composite outperformed with a 1.69% advance to 26,418.30. The move higher unwound most of Wednesday's selloff, when the Dow shed 631 points and the S&P fell 0.4% as investors digested the Fed's post-meeting statement and a combative press conference from Chair Kevin Warsh.
Yields ease, easing the inflation jolt
The Federal Open Market Committee voted 12-0 on Wednesday to raise the federal funds rate by a quarter point to a range of 3.75% to 4%, the central bank's first hike in more than three years. Policymakers' updated projections showed 16 of 18 officials expect at least one more increase before year-end, and the committee's statement described inflation as "elevated" even as it characterized economic activity as "expanding at a solid pace."
The 10-year Treasury yield, which had spiked above 5% Wednesday to its highest level in nearly two decades, pulled back about 7 basis points Thursday to roughly 4.93% as traders concluded the initial rate-shock reaction had run its course. Easing crude prices added to the calmer tone: West Texas Intermediate settled near $101 a barrel as Saudi Arabia continued routing additional cargoes around a damaged pipeline, taking some pressure off the inflation outlook that had unsettled markets a day earlier.
The hike puts Warsh, whom President Trump installed at the Fed earlier this year on the expectation he would push rates lower, in the position of tightening policy against the wishes of the president who appointed him, as one outlet's own account of Wednesday's decision put it — a dynamic that has shadowed markets through the runup to this week's decision.
Lennar's warning drags on homebuilders
Not every corner of the market joined the rebound. Lennar shares fell about 2%, briefly touching a 52-week low of $76.61, after the Miami-based builder reported third-quarter results that missed Wall Street's targets on both lines. Net earnings fell to $284 million, or $1.19 per diluted share, from $591 million, or $2.29 per share, a year earlier; adjusted earnings of $1.23 per share came in below the $1.28 analysts had penciled in. Revenue dropped 8.7% year over year to $8.05 billion, missing the $8.31 billion consensus estimate.
New home orders fell 9% to 20,879 units, and the company trimmed its full-year 2026 delivery target to a range of 80,000 to 81,000 homes, down from the 82,000-to-83,000 range it had already lowered guidance to earlier this year. Lennar pointed to mortgage rates that climbed to roughly 6.8% by quarter's end and a broader pullback in buyer confidence as affordability pressures mount.
Our third quarter 2026 results reflect consistent focus on our operating strategy of maintaining volume and production while navigating a challenging economic environment.
Stuart Miller, Executive Chairman, Lennar
The results, detailed in a filing with the Securities and Exchange Commission, add Lennar to a growing list of builders flagging softer demand since the Fed began signaling higher-for-longer policy. Rivals KB Home and AutoZone are next up on the earnings calendar, both due to report September 22, and investors are likely to watch closely for whether Lennar's affordability warnings are echoed across the sector.
For now, traders appear to be betting that Thursday's rebound reflects relief that the Fed's move was already priced in rather than confidence that rate increases are over. With another hike telegraphed before year-end, strategists say the market's next major test will be how consumer-facing sectors — starting with housing — absorb borrowing costs that are no longer falling.
