The S&P 500 Closed Its Second Straight Positive Quarter as Cooler Inflation Fought Rising Treasury Yields

Wall Street closed out the third quarter on Wednesday with the S&P 500 down 18.81 points, or 0.25 percent, to 7,652, a modest single-day decline that still left the index with a 2 percent gain for the quarter as a whole even after it slipped 0.4 percent across September. A market review from Investrade said the Dow Jones Industrial Average fared worse on the day, falling 441.13 points, or 0.86 percent, to 50,908, while the Nasdaq Composite bucked the trend to close up 63.52 points, or 0.24 percent, at 26,861.

A quarter split three ways

The three major indexes told noticeably different stories once the quarter was totalled up, with the S&P 500 rising 2.0 percent, the Dow falling 2.7 percent and the Nasdaq climbing 2.5 percent, a spread wide enough to show how unevenly the market's gains and losses landed across different kinds of companies over the three months. September on its own was harsher for the Dow specifically, which fell 4.3 percent over the month even as the Nasdaq added 1.9 percent, underscoring how much of the quarter's Dow weakness was concentrated in its final month rather than spread evenly across July, August and September.

Inflation came in cooler than expected

The day's economic data initially gave investors reason for optimism, with the Federal Reserve's preferred inflation gauge showing the September core PCE Price Index rising 0.2 percent month on month against a 0.3 percent consensus forecast, while the year-over-year reading improved to 3.0 percent. Headline PCE inflation also came in below expectations, at 0.3 percent monthly against an anticipated 0.4 percent, a combination that would ordinarily support a rally by easing pressure on the Federal Reserve to keep policy tight.

Yields erased the morning's optimism

Those cooler inflation numbers were not enough to hold back a late reversal, as CNBC's live markets coverage reported the 10-year Treasury yield climbing to 5.304 percent, its highest level in 24 years, a move that raises borrowing costs across the economy regardless of what the latest inflation print shows. The late-day shift from gains to losses in the S&P 500 and Dow reflects how directly rising yields can offset otherwise encouraging inflation data, since higher yields make bonds more competitive with stocks and raise the discount rate applied to future corporate earnings.

A quarter that rewarded growth over value

The Nasdaq's stronger showing across both September and the full quarter, even as the more value-oriented Dow fell in both periods, points to a market still willing to pay up for growth and technology-heavy names despite the drag from higher yields, a pattern that has held for much of 2026. Whether that preference survives if yields keep climbing from an already 24-year high is the question investors are carrying into the fourth quarter, a period that opened the very next day with exactly the kind of yield-driven selloff that closed out the third.

Setting up the fourth quarter

With the S&P 500 and Nasdaq both finishing the quarter in positive territory despite a bond market working against them, the final day of September left Wall Street in a genuinely mixed position heading into October, neither clearly bullish on the strength of cooling inflation nor clearly bearish on the back of surging yields. That tension, cooler prices against costlier borrowing, is likely to remain the defining dynamic for markets until one force or the other clearly wins out.