Stocks are having their best run in two years as investors bet that the Federal Reserve's interest hikes have ended.

The benchmark S&P 500 (^GSPC) has risen on eight straight trading days for the first time since November 2021 while the Nasdaq Composite (^IXIC) has risen for nine consecutive sessions, also its highest since November 2021.

Stocks have surged amid a reversal in rising Treasury yields. The "pain trade" in the bond market had sent the benchmark index down three straight months for the first time since the onset of the COVID-19 pandemic in March 2020.

"You had a condition of being oversold and the catalyst was yields," Truist co-CIO Keith Lerner told Yahoo Finance. "Yields, in our view, was the biggest challenge for this market."

But yields made a swift move lower after the US Treasury announced slower debt auction increases than initially expected last Wednesday, and the market interpreted Fed commentary to mean the central bank is done with its historically fast interest rate hiking cycle.

The move in yields accelerated as weaker-than-expected jobs data showed signs the economy may be slowing enough without the need for more tightening from the Fed.

The 10-year Treasury yield (^TNX) closed Wednesday at 4.52%, the lowest close since Sept. 22.

"That three-month drawdown was in the face of rising Treasury yields," SoFi head of investment strategy Liz Young told Yahoo Finance. "So if you've flipped everything on its head, there is just a sense of relief that okay, at least yields may be done going up, and maybe the Fed has done hiking, so some of the pressure that was on [it] got lifted."

Investors had been cautious going into the Fed's policy meeting earlier this month as fears swirled over the central bank's "higher for longer" stance on interest rates, geopolitical uncertainty surrounding rising tensions in the Middle East, and a looming debt ceiling debate in Washington.

And, to be sure, the rally hasn't eliminated those risks from the purview. 

"To me this rally shows you the risks of investing based on a feeling," eToro US investment analyst Callie Cox told Yahoo Finance. "Things don't feel great right now, I will acknowledge that all day, but the fact that fear is so rampant is actually a supportive thing for markets because people are aware of the risks."

'Stuck in this conundrum'

Stocks are rallying, but which stocks lead the way remains key for investors when considering if the rally is sustainable.

Market breadth has been a concern among strategists throughout the 2023 rally as the "Magnificent Seven" tech stocks have produced most of the S&P 500's gains.

The recent rally showed signs of broadening out, with interest rate sensitive areas of the market like real estate and small caps rallying last week, but those trends have partly reversed in the past three trading sessions.

Technology has once again led the rally, rising more than 7% the last week, the most of any sector. And as Lerner puts it, that brings stocks back to a similar "playbook" that it's followed for much of the year.

"I would much prefer to see high beta small caps, financials, act better," Lerner said. "It just in general is typically a more healthy broad market. And if one area goes down, there's another area to pick it up."

Young remains concerned the market is "prematurely celebrating" the end of a restrictive rate period and isn't accounting for the effects of "high for longer" that have to filter through the economy.

Young also noted that the concentrated leadership "can't go on forever" and what that means for the market remains to be seen.

"That's still the biggest question," Young said. "We've again reentered the debate that among bulls and bears, the bears saying this is just a bear market rally, the bulls saying that this is now durable upside, we're going to have a year end rally. And [in] that debate you can find data to support either side."

"We're once again, as investors, stuck in this conundrum of, 'I can prove both sides of the equation, I can prove a positive case and I can prove a negative case,'" she continued.

Josh Schafer is a reporter for Yahoo Finance.

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