By Medha Singh and Purvi Agarwal

(Reuters) -Wall Street’s main indexes gained some ground on Thursday, a day after the Federal Reserve’s projections of fewer-than-expected interest rate cuts and higher inflation next year wrong-footed some investors and pummeled U.S. stocks.

The benchmark S&P 500 was last up 0.3%, paring most of its gains in the first hour of the trading session, as a rise in U.S. Treasury yields weighed. The U.S. 10-year yield hit a fresh 6-1/2 month high at 4.57% after upbeat economic data. [US/]

“The stock market is going to take all of its cues from the bond market moving forward,” said George Cipolloni, portfolio manager at Penn Mutual Asset Management.

“I’m going to stare at the 10-year (yield) and hope it doesn’t break the 4.6% level.”

The Fed on Wednesday said it expects to make just two 25 basis point cuts in 2025, half a percentage point less than its September forecast for the first year of the new Trump administration, sending the three main U.S. stock indexes to their sharpest daily declines since August.

Traders now see just one quarter-point rate reduction by mid-2025, and see less than two cuts in total by the end of the year, compared with last week’s expectations of three rate cuts.

“We could see a market struggle for a little bit mainly because there is uncertainty about the persistence of inflation and where rates will be a year from now,” Cipolloni said.

Bank stocks rose 1.3% as a rise in yields improves the profitability of lenders, while megacap and growth stocks recovered some ground, with Nvidia adding 3.2% and Amazon.com gaining 2.1%, respectively.

At 11:22 a.m. ET, the Dow Jones Industrial Average rose 257.46 points, or 0.61%, to 42,584.33 and was on track to snap its ten-session losing streak, its longest since 1974.

The S&P 500 gained 33.70 points, or 0.57%, to 5,905.86 and the Nasdaq Composite rose 129.31 points, or 0.67%, to 19,522.01.

The CBOE volatility index, Wall Street’s fear gauge, eased to 20.56 points after hitting a four-month high a day earlier.

The benchmark S&P 500 had hit a near one-month low on Wednesday as investors adjusted their risk exposure to reflect the impact of higher borrowing costs in 2025.

The hawkish shift from the Fed comes just three months after the U.S. central bank began its monetary easing cycle with a larger-than-usual 50 basis point interest rate cut that spurred risk appetite and helped push Wall Street to record levels.

Meanwhile, data showed the U.S. economy grew faster than previously estimated in the third quarter, while weekly jobless claims fell more than expected last week.

Micron slumped 15.5% following its forecast of quarterly revenue and profit below estimates.

Homebuilder Lennar shed 5.5% after reporting fourth-quarter results below estimates, pulling the PHLX housing index down by 2.1%.

Declining issues outnumbered advancers by a 1.34-to-1 ratio on the NYSE and by a 1.04-to-1 ratio on the Nasdaq.

The S&P 500 posted two new 52-week highs and 36 new lows, while the Nasdaq Composite recorded 18 new highs and 191 new lows.

(Reporting by Medha Singh and Purvi Agarwal in Bengaluru; Editing by Maju Samuel)

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