On Wednesday, the final trading day of September, fresh U.S. economic data showed that inflation cooled last month, Treasury yields moved lower, and major stock indices opened higher.

The Dow Jones Industrial Average rose 0.12%, the S&P 500 gained 0.27%, and the Nasdaq climbed 0.39%.

Micron Technology led technology shares higher, rising 1%. Robinhood was Wednesday's biggest winner, surging 5%, after the company launched an AI-powered smart trading tool and introduced extended weekend trading hours.

Among the "Magnificent Seven": Alphabet rose 1.35%, Nvidia gained 1.07%, Apple added 0.67%, Microsoft advanced 0.50%, Amazon edged up 0.28%, Tesla fell 0.68%, and Meta Platforms dropped 1.46%.

The August personal consumption expenditures (PCE) price index rose 3.4% year over year, below the prior reading of 3.7%. Economists surveyed by Dow Jones had expected the inflation gauge to remain unchanged at 3.7%. Even more encouraging, core PCE, which strips out food and energy, rose 3% year over year, below last month's 3.3% and also below economists' forecasts.

Driven by the cooling inflation data, the 10-year Treasury yield retreated from its highest level since 2007, last reported at 5.23%. The 30-year Treasury yield also moved down from its peak since June 2002.

Throughout September, elevated yields continued to weigh on stocks; as of Tuesday, the S&P 500 had fallen 0.2% for the month. Rising borrowing costs have been one of investors' biggest concerns, because sovereign bond yields serve as a key pricing anchor for global markets — not only an important reference for investors allocating to riskier equities, but also a benchmark for mortgage and corporate financing costs.

Carlo Franchini, head of institutional clients at Banca Ifigest in Milan, said: "We have reached a truly significant yield level. The temptation for investors to shift from stocks to bonds could become a problem." However, Franchini said he has not yet taken profits on equities. He believes that if tensions around the Strait of Hormuz ease, pulling oil prices lower and relieving pressure on bond yields, stocks could still find support in October. "In my view, it's better to stay long," he said.

This week, 10-year government bond yields in Germany and France rose to 17-year and 18-year highs, respectively, and are expected to rise by about 70 basis points and 120 basis points this quarter. In Japan, the 10-year government bond yield hovered near multi-decade highs and is expected to gain 38 basis points this quarter.

Despite the sharp rise in sovereign borrowing costs this quarter, global stock markets have generally shown strong resilience. On Wednesday, expectations for a Federal Reserve rate hike cooled somewhat. CME Group's FedWatch tool showed traders pricing a 47% probability of a 25-basis-point rate increase next month, down from 51% the previous day. Even with the favorable inflation data, traders still expect one more rate hike in December.

Adam Hetz, global head of multi-asset and portfolio manager at Janus Henderson Investors, said in a statement: "Despite today's better-than-expected inflation data, with employment and GDP data strong, this report is unlikely to change the widely held expectation that the Fed will hike rates again before year-end."

ADP private-sector employment data offset the positive inflation news. The ADP report showed 90,000 jobs added in September, well above the economists' consensus of 68,000.

Wednesday was both the last day of September and the final day of the third quarter. Market performance diverged on monthly and quarterly bases. On a monthly basis, the S&P 500 and Dow Jones were likely to close lower, while the Nasdaq rose more than 1%. On a quarterly basis, the S&P 500 and Nasdaq gained 2%, while the Dow Jones fell nearly 2%.