Wall Street Review: Stock Rally Pauses on Profit-Taking, Higher Bond Yields

A growing economy and fewer job losses revived fears of a re-acceleration of inflation.

Traders work on the floor of the New York Stock Exchange during morning trading on Sept. 17, 2025. Michael M. Santiago/Getty Images

After rallying to new highs for three weeks, U.S. stocks paused this week on profit-taking and rising bond yields. Stocks have so far defied the typical September weakness, buoyed by mostly favorable economic news, but high valuations are posing challenges for investors, according to an analyst.

The Dow Jones Industrial Average ended the week on Sept. 26 at 46,247, down by 0.15 percent for the week. The S&P 500 Index closed at 6,643, down by 0.31 percent. Both indexes pulled back from new records reached earlier in the week.

The technology-heavy Nasdaq also ended lower, down by 0.65 percent to 22,484, while the Russell 2000 declined 0.59 percent, halting its multi-week bull run.

Market volatility, measured by the Chicago Board Options Exchange’s Volatility Index, reversed course from the previous week, dropping by 1.04 percent.

After hitting new highs in a broad rally the previous week, Wall Street opened lower on Sept. 22 as investors engaged in profit-taking.

However, things quickly turned around following the announcement of a landmark partnership between Nvidia and OpenAI.

The new entity will scale OpenAI’s computing with multi-gigawatt data centers powered by millions of Nvidia GPUs, including the Nvidia Vera Rubin platform. Nvidia also plans to invest up to $100 billion in OpenAI as each gigawatt is deployed.

“This is the biggest AI infrastructure project in history,” said Nvidia founder and CEO Jensen Huang in a statement.

“This partnership is about building an AI infrastructure that enables AI to go from the labs into the world.”

Meanwhile, newly sworn-in Federal Reserve governor Stephen Miran rationalized his push for more aggressive interest rate cuts, boosting positive sentiment for equities and helping the S&P 500 and Nasdaq hit new records.

Profit-taking returned to equity markets on the morning of Sept. 23 following the release of the S&P Global U.S. Services PMI, which fell to 53.9 in September from 54.5 the previous month, marking the slowest pace of expansion since June.

The GDP growth report from the Bureau of Economic Analysis (BEA) shows that the U.S. economy expanded at a revised annual rate of 3.8 percent in the second quarter, the strongest performance since the third quarter of 2023, reflecting an upward revision to consumer spending.

In addition, the Department of Labor reported a decline in the initial jobless claims by 14,000 from the previous week to 218,000 in the third week of September, marking the lowest print in two months.

A growing economy and fewer job losses revived fears of a re-acceleration of inflation.

The bond market began selling off, with the yield on the U.S. 10-year Treasury note edging higher toward 4.2 percent on the day, prompting another round of selling in equities.

After a three-day losing streak in equities, the buy-in-the-dips crowd returned to the market on the morning of Sept. 26, encouraged in part by the August PCE report, which showed inflation in line with expectations, despite a drop in the University of Michigan consumer sentiment index.

The reports helped ease some inflation concerns, pushing bond yields lower on the day, though they remained higher for the week.

Rick Gardner, chief investment officer at Raleigh, North Carolina-based RGA Investments, believes that stocks have been bucking the historical September weakness so far, thanks to a highly favorable monetary policy, strong earnings, solid economic growth, and muted inflation.

However, he believes the stock market’s strength is making it harder to find attractive investment opportunities, as rising valuations make it all the more important for investors to be selective.

“The focus for the remainder of 2025 will be more about what will drive markets in 2026, which includes earnings, the prospects of additional rate cuts in 2026, and the eventual uncertainty over the midterm elections,” he told The Epoch Times.