U.S. stocks surged Thursday as a sharp easing in Middle East risk, a rebound in chipmakers and lower Treasury yields helped Wall Street recover from a two-day slide and deliver its strongest session in about two months.

The S&P 500 rose 127.31 points, or 1.8%, to close at 7,394.30, according to the Associated Press. The Dow Jones Industrial Average climbed 929.97 points, or 1.9%, to 50,848.75. The Nasdaq Composite, which had been pressured earlier in the week by technology weakness, gained 640.16 points, or 2.5%, to 25,809.66. The Russell 2000 index of smaller companies rose 85.57 points, or 3%, to 2,921.03, signaling a broader risk-on move beyond the largest technology stocks.

The rally followed a shift in geopolitical tone after President Donald Trump called off threatened military strikes on Iran and cited progress in talks. Investors had been watching the conflict closely because any escalation risked disrupting energy flows, pushing oil prices higher and adding another inflationary pressure point for businesses and households. Reuters reported that Wall Street staged its biggest bounce in two months while oil and bond yields tumbled after the president’s reversal.

The market move was not confined to a single index or trading theme. Reuters reported that eight of the 11 S&P 500 sectors advanced Thursday, with technology, industrials and materials each gaining 3% or more. Energy stocks lagged as oil prices fell, reflecting the market’s reduced fear of a near-term supply shock. That sector split underscored the central logic of the day’s trading: lower geopolitical risk helped equities broadly, but hurt the part of the market that had benefited from higher crude prices.

Technology shares were again the market’s main engine. Chip stocks rebounded sharply, helping the Nasdaq outperform and giving investors a cleaner read on risk appetite after recent pressure on semiconductor names. Reuters said the Philadelphia Semiconductor Index rose 8%, its biggest gain since April 2025, with Micron Technology up 12% and Intel up 9%. The chip rally was particularly important for Silicon Valley-linked investors because semiconductor demand remains tightly tied to artificial intelligence infrastructure, cloud data-center expansion and corporate technology spending.

The gains also helped offset weakness in Oracle, which fell 9% according to Reuters. That divergence showed that investors were not simply buying every large technology stock indiscriminately. Instead, the session favored companies tied to the semiconductor and industrial supply chain recovery while punishing names where company-specific concerns remained in focus. Even so, the scale of the chip rebound was strong enough to lift the broader technology complex and support the Nasdaq’s 2.5% advance.

Bond-market moves reinforced the equity rally. The Associated Press reported that Treasury yields eased sharply, and Reuters said U.S. yields were down 8 to 9 basis points across the curve. Lower yields tend to support stock valuations, particularly for growth companies whose earnings expectations stretch far into the future. They also ease some pressure on rate-sensitive sectors, including housing, consumer finance and small-cap companies that rely more heavily on borrowing.

Thursday’s advance came after a volatile stretch for U.S. equities. The S&P 500 had pulled back in back-to-back sessions, according to the Associated Press, returning to levels last seen in early May before Thursday’s rebound. That context made the size of the move more significant: investors were not merely adding to an uninterrupted rally, but reversing a short-term drawdown driven by geopolitical and technology-sector concerns.

For the week, the major indexes were mixed even after Thursday’s surge. The Associated Press reported that the S&P 500 was up 10.56 points, or 0.1%, for the week, while the Dow was down 18.03 points, or less than 0.1%. The Nasdaq was up 100.23 points, or 0.4%, and the Russell 2000 was up 87.53 points, or 3.1%. That weekly pattern showed how much the small-cap index benefited from the easing in yields and improved risk appetite.

Year to date, the market remained solidly positive. The S&P 500 was up 8%, the Dow was up 5.8%, the Nasdaq was up 11%, and the Russell 2000 was up 17.7%, according to the Associated Press. The Russell’s lead is notable because smaller companies often respond more directly to expectations for domestic growth, borrowing costs and investor confidence. Its performance Thursday suggested traders were willing to move beyond the handful of mega-cap technology stocks that have dominated much of the market narrative.

Oil’s decline was another important piece of the session. Reuters reported that oil fell 3% as fears of immediate escalation eased. Lower crude prices can reduce pressure on airlines, logistics companies, retailers and manufacturers, while also helping limit inflation expectations. But the relief remains conditional: traders are still likely to react quickly to any renewed military threat, shipping disruption or diplomatic breakdown involving Iran and the broader region.

Investors also looked ahead to a busy Friday. Reuters listed U.S. University of Michigan consumer sentiment and inflation expectations as market-moving items to watch, along with continued Middle East developments. Consumer sentiment matters for equities because it can influence expectations for spending, hiring and corporate revenue. Inflation expectations are especially important for Federal Reserve policy assumptions, Treasury yields and valuations across growth sectors.

The market is also watching technology capital markets closely. Reuters noted that attention was turning to SpaceX’s expected trading debut, describing it as a record-breaking initial public offering with unusually high retail participation. While that is a separate corporate event from Thursday’s stock-index rally, it fits the same broader theme: investors are again showing willingness to take risk when geopolitical stress and rates appear less threatening.

For U.S. businesses, Thursday’s rally offered a temporary reprieve from several pressures at once. Lower yields can support financing conditions. Lower oil prices can reduce input-cost anxiety. A stronger stock market can improve corporate confidence and household wealth effects, particularly among consumers with retirement accounts and brokerage exposure. But the rebound did not eliminate the underlying risks. Energy markets remain sensitive to Middle East headlines, technology valuations remain vulnerable to earnings disappointments, and the Federal Reserve’s path still depends on inflation and labor-market data.

The clearest message from Thursday’s session was that investors remain highly responsive to geopolitical de-escalation. The market had sold off when Iran-related risks intensified, then rallied sharply when those risks appeared to ease. That sensitivity is likely to remain a defining feature of near-term trading, especially for companies exposed to energy prices, global supply chains, semiconductors and interest-rate expectations.

For now, Wall Street enters Friday with momentum restored but not fully stabilized. The indexes recovered sharply, chip stocks regained leadership, small caps outperformed and yields moved lower. Whether that becomes a durable advance will depend on whether diplomatic progress holds, whether oil remains contained and whether upcoming U.S. economic data support the market’s renewed appetite for risk.