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Micron, Lennar ( LEN ) fall after results

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Banks firm as U.S. bond yields rise

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Megacap and growth stocks bounce back

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Indexes up: Dow 0.61%, S&P 500 0.57%, Nasdaq 0.67%

(Updates to late morning trading)

By Medha Singh and Purvi Agarwal

Dec 19 (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.

"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 ( NVDA ) 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 ( LEN ) 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.