Stocks are rising, a day after a disappointing Fed forecast sparked a selloff

US stocks stabilized on Thursday after one of their worst days of the year.

The S&P 500 rose 0.4% in morning trading, a day after plunging 2.9% as the Federal Reserve said it might deliver fewer interest rate cuts next year than originally thought. The Dow Jones Industrial Average rose 194 points, or 0.5%, as of 10:05 a.m. Eastern time, after falling more than 1,100 points on Wednesday. The Nasdaq Composite rose 0.5%.

The indices are still near their records and the S&P 500 remains on track for one of its best years of the millennium. Wednesday’s drop only took some of the enthusiasm out of the market, as critics had already warned it was too buoyant and needed everything going right to justify its high prices.

Traders now expect the Federal Reserve to make just one or perhaps two interest rate cuts next year, according to data from CME Group. A month ago, the majority thought at least two cuts in 2025 was a sure thing. Wall Street loves lower interest rates because they stimulate the economy and drive up investment prices, but they can also stoke inflation.

Darden Restaurants, the company behind Olive Garden and other chains, helped lead the market higher on Thursday after rising 13.4%. The company posted a profit in the last quarter that significantly exceeded analysts’ expectations. The operator of the LongHorn Steakhouse also gave a sales forecast for this financial year that exceeded that of the analysts.

Accenture rose 6.5% after the consulting firm beat profit expectations in its latest quarter. CEO Julie Sweet said the company was seeing growth globally and that the company had raised its revenue forecast for this fiscal year.

Amazon shares rose 1.6% even as workers at seven of its facilities went on strike Thursday, in the middle of the online retail giant’s busiest time of the year. Amazon says it expects no impact on its operations during what the union is calling the largest strike against the company in U.S. history.

They helped offset a decline at Micron Technology, which fell 17.4% despite reporting higher-than-expected profit. The computer memory maker’s sales fell short of Wall Street forecasts, and CEO Sanjay Mehrotra said he expected consumer demand to remain weaker in the near term. A sales forecast was made for the current quarter that was well below analysts’ expectations.

Lamb Weston, which makes French fries and other potato products, fell 19.1% after falling short of analysts’ profit and sales expectations in the latest quarter. The company also lowered its financial targets for the fiscal year, saying demand for frozen potatoes continued to decline, particularly outside North America. The company replaced its CEO.

In the bond market, yields were mixed a day after the rise on expectations that the Fed would cut interest rates less in 2025. Reports on the US economy were mixed.

One of them showed that the overall economy grew faster than originally estimated in the summer, at an annual rate of 3.1%. The economy remained remarkably resilient, even though the Fed kept interest rates at a two-decade high for a while before starting cutting in September.

A separate report showed that fewer U.S. workers filed for unemployment benefits last week, an indication that the labor market also remains solid. But a third report said manufacturing in the Mid-Atlantic region is unexpectedly shrinking again, despite economists’ growth expectations.

The yield on the 10-year Treasury note rose to 4.56% from 4.52% late Wednesday and from less than 4.20% earlier this month.

But the two-year Treasury yield, which more closely reflects expectations of short-term Fed action, fell to 4.31% from 4.35%.

The rise in longer-term yields has put pressure on the housing market as mortgage rates remained higher. Homebuilder Lennar fell 4.6% after reporting weaker earnings and sales for the latest quarter than analysts expected.

CEO Stuart Miller said that “the housing market, which appeared to be improving as the Fed cut short-term interest rates, proved far more difficult during the quarter as mortgage rates rose.”

“Although demand remained strong and chronic supply shortages continue to drive the market, our results were impacted by affordability constraints due to higher interest rates,” he said.

In overseas stock markets, London’s FTSE 100 fell 1.2% after the Bank of England paused interest rate cuts and left its base rate unchanged on Thursday. The move comes as inflation there has continued to rise above the central bank’s target rate of 2%, while the British economy remains stagnant at best.

The Bank of Japan also left its key interest rate unchanged and the Nikkei 225 in Tokyo fell 0.7%. The indices also fell in large parts of Asia and Europe.

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AP business reporters Matt Ott and Elaine Kurtenbach contributed.