The Nasdaq has pushed to record highs even as 10-year Treasury yields hover near 5% since the Federal Reserve's latest meeting. AI optimism around Meta's new assistant and a pullback in oil prices are helping stocks absorb the pressure, though the resilience may not hold if yields break decisively above the 5% level.
Equities have kept climbing even as 10-year Treasury yields flirt with the 5% mark since the Fed's latest meeting, a level that would typically make stock investors uneasy. Instead, the Nasdaq has pushed to record highs as a fresh wave of AI enthusiasm gives tech shares another lift.
Meta's Muse fuels the AI trade
Meta sits at the center of the move after the early success of its new AI assistant, Muse, sparked a sharp rally in its shares that spilled into other AI-linked names. Semiconductor stocks have benefited too, as investors weigh what another wave of consumer AI adoption could mean for revenue, rather than focusing only on AI spending. That shift is a welcome distraction after increased scrutiny over mounting big-tech capital expenditure in the past month or so.
Cheaper oil eases the pressure
Falling oil prices have given equities a further reprieve. Brent crude slipping back below $100 has eased concern that higher energy prices would feed into inflation and push central banks to stay more hawkish. Together, the AI story and softer oil give the market something to trade against the rates backdrop.
Why the calm could still break
Still, there is a real difference between yields testing 5% and breaking convincingly above it. If yields push beyond that threshold, the conversation for broader markets changes quickly, since higher yields raise the discount rate applied to future earnings — particularly important for richly valued technology and AI stocks, where investors are paying today for significant growth tomorrow. Higher yields also make bonds a more attractive alternative to equities.
For now, AI optimism and softer oil are helping stocks absorb the rates shock, but another leg higher in yields would test how much of that resilience is real.
Source: Investinglive
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