NEW YORK — (AP) — U.S. stocks are stabilizing Thursday following one of their worst days of the year, and indexes are clawing back about a third of those losses.

The S&P 500 rallied 1.1% in early trading, a day after tumbling 2.9% when the Federal Reserve said it may deliver fewer cuts to interest rates next year than earlier thought. The Dow Jones Industrial Average was up 433 points, or 1%, as of 9:35 a.m. Eastern time, following Wednesday's drop of more than 1,100 points. The Nasdaq composite rose 1.1%.

Indexes are still near their records, and the S&P 500 is still on track for one of its best years of the millennium. Wednesday's drop just took some of the enthusiasm out of the market, which critics had already been warning was overly buoyant and would need everything to go correctly for it to justify its high prices.

Traders are now expecting the Federal Reserve to deliver just one or maybe two cuts to interest rates next year, according to data from CME Group. A month ago, the majority saw at least two cuts in 2025 as a safe bet.

Fed Chair Jerome Powell warned Wednesday that a still-resilient economy and upward pressure on inflation mean the central bank will likely take it slower on rate cuts next year. It’s a shift after the Fed had been quickly cutting its main interest rate from a two-decade high in September.

Wall Street loves lower interest rates because they give the economy a boost and goose prices for investments, but they can also provide fuel for inflation. And the S&P 500 had already set an all-time high 57 times so far this year because of expectations that the Fed would keep delivering cuts to rates in 2025.

Darden Restaurants, the company behind Olive Garden and other chains, helped lift the market Thursday after leaping 12.1%. It delivered profit for the latest quarter that edged past analysts’ expectations. The operator of LongHorn Steakhouses also gave a forecast for revenue for this fiscal year that topped analysts’.

CarMax revved 8.2% higher after likewise topping analysts’ expectations for profit in the latest quarter. CEO Bill Nash said the auto dealer benefited from “a more stable environment” for vehicle prices.

Amazon shares added 1.6%, even as workers at seven of its facilities went on strike Thursday, right in the middle of the online retail giant's busiest time of the year. Amazon says it doesn't expect an impact on its operations during what the workers' union calls the largest strike against the company in U.S. history.

They helped offset a tumble for Micron Technology, which fell 15.3% despite also reporting stronger profit than expected. The computer memory company’s revenue fell short of Wall Street’s forecasts, and CEO Sanjay Mehrotra said it expects demand from consumers to remain weaker in the near term. It gave a forecast for revenue in the current quarter that was well short of what analysts were thinking.

Lamb Weston, which makes French fries and other potato products, dropped 13.8% after falling short of analysts' expectations for profit and revenue in the latest quarter. It also cut its financial targets for the fiscal year, saying demand for frozen potatoes is continuing to soften, particularly outside North America. The company replaced its chief executive.

In the bond market, yields were mixed a day after shooting higher on expectations that the Fed would deliver fewer cuts to rates in 2025 than it had been forecasting just a few months ago. Reports on the U.S. economy came in mixed.

One showed the overall economy grew at a 3.1% annualized rate during the summer, faster than earlier thought. The economy has remained remarkably resilient even though the Fed held its main interest rate at a two-decade high for a while before beginning to cut them in September.

A separate report showed fewer U.S. workers applied for unemployment benefits last week, an indication that the job market also remains solid. But a third report said manufacturing in the mid-Atlantic region is unexpectedly contracting again despite economists' expectations for growth.

The yield on the 10-year Treasury rose to 4.54% from from 4.52% late Wednesday and from less than 4.20% earlier this month.

But the two-year yield, which more closely tracks expectations for action by the Fed in the near term, edged back to 4.31% from 4.35%.

The rise in longer-term yields has put pressure on the housing market by keeping mortgage rates higher. Homebuilder Lennar fell 4.1% after it reported weaker profit and revenue for the latest quarter than analysts expected.

CEO Stuart Miller said that “the housing market that appeared to be improving as the Fed cut short-term interest rates, proved to be far more challenging as mortgage rates rose” through the quarter.

“Even while demand remained strong, and the chronic supply shortage continued to drive the market, our results were driven by affordability limitations from higher interest rates,” he said.

In stock markets abroad, London's FTSE 100 fell 1% after the Bank of England paused its cuts to rates and kept its main interest rate unchanged on Thursday. The move comes as inflation there moved further above the central bank's 2% target rate, while the British economy is flatlining at best.

The Bank of Japan also kept its benchmark interest rate unchanged, and Tokyo’s Nikkei 225 fell 0.7%. Indexes also sank across much of the rest of Asia and Europe.

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AP Business Writers Matt Ott and Elaine Kurtenbach contributed.

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