U.S. stocks ignore high yield warnings! Tech stocks lead gains, pushing the S&P 500 near historic highs

According to Zhihu Finance APP, as investors largely shrugged off concerns triggered by bond yields rising to multi-decade highs, technology stocks led the advance, pushing the S&P 500 Index close to a record high. On Monday, all three major U.S. stock indexes closed higher, with the S&P 500 up 0.66%; the Nasdaq gained 1.05%, setting a new closing record; and the Dow Jones increased by 0.18%.

Most large technology stocks rose. NVIDIA (NVDA.US) increased by 2.1%, setting a new all-time closing high and reaching a market value of $5.76 trillion; SpaceX (SPCX.US) rose 7.6%, to its highest level since mid-June; Tesla (TSLA.US) was up 2.2%; Microsoft (MSFT.US) gained 1.48%; Meta (META.US) was up 1.9%; and Google (GOOGL.US) rose 0.86%.

Chip stocks showed mixed performances. Western Digital (WDC.US) rose more than 6%, Seagate Technology (STX.US) was up more than 4%, Taiwan Semiconductor Manufacturing Company (TSMC.US) and Broadcom (AVGO.US) both increased over 2%; while Qualcomm (QCOM.US) and Intel (INTC.US) fell more than 2%, Micron Technology (MU.US) and Arm (ARM.US) dropped over 1%, and AMD (AMD.US) and ASML (ASML.US) declined as well.

Despite factors such as the potential for higher interest rates, soaring energy costs, and the resurgence of inflation concerns driving a surge in global bond yields, equities remained largely unaffected. Instead, investors focused on strong corporate earnings, resilient consumer spending, and a surge of investment related to artificial intelligence (AI), which propelled major benchmark indexes higher.

The U.S. third-quarter earnings season will officially kick off next week, with major U.S. banks reporting results first. According to LSEG data, analysts on average expect S&P 500 component earnings to grow more than 30% year-over-year in the third quarter, largely thanks to AI-related stocks.

Beata Manthey, a strategist at Citi, stated: “Despite facing increasing headwinds such as geopolitical risks and rising interest rates, the S&P index is still up about 13% so far this year and is now just a step away from its all-time high.” Lisa Shalett, from Morgan Stanley Wealth Management, said: “Given that economic growth is accelerating and the AI boom is relatively insensitive to interest rates, it makes sense that the stock market remains relatively calm while the bond market faces a ‘perfect storm.’”

Meanwhile, the bond market remains one of the main areas of focus. On Monday, U.S. Treasury bonds came under renewed pressure, with long-term yields reaching new multi-decade highs. Both the 10-year and 30-year U.S. Treasury yields rose at least 7 basis points, climbing to 5.34% and 5.7% respectively—the highest levels since 2002. Yields on shorter-term Treasuries rose by about 2 to 4 basis points.

As the economy expands with the robust growth of AI infrastructure spending, and persistently high inflation keeps the possibility of further Federal Reserve rate hikes alive, investors remain cautious about declaring that bond yields have peaked. A U.S. services report released Monday showed that cost pressures rose last month at their fastest pace in over four years.

Additionally, in the stock market, market breadth remains one of investors’ top concerns. The proportion of U.S. stocks trading above their 10-day, 50-day, and 200-day moving averages has now fallen to levels not seen since March. Piper Sandler Chief Market Technician Craig Johnson said: “We need to see interest rates and oil prices pull back, but that hasn’t happened yet, and internal market indicators are deteriorating. This will be a headwind for the market.”