Wall Street Review: Tech Drives Stocks Higher, but Rising Bond Yields Cloud Outlook

Wall Street closed out the week higher, with technology shares driving the gains as investors bet on artificial intelligence’s monetization potential and rallied around Meta Platforms’ new AI agent.

The advance came even as rising oil prices and bond yields—typically a drag on equities—kept the rally in check.

The Dow Jones Industrial Average edged up 0.28 percent for the week, closing at 51,828 on Friday. The S&P 500 ended at 7,743, up 1.21 percent for the week. The Nasdaq Composite surged 2.06 percent, buoyed by strong gains in Meta, AMD, and Microsoft, while the small-cap Russell 2000—among the most sensitive to interest rates—fell 0.8 percent, the worst performer for yet another week.

The CBOE Volatility Index closed nearly unchanged at 14.87, suggesting investors lacked conviction about the market’s direction.

The week’s dominant theme was a tug-of-war between AI-fueled optimism in tech and mounting pressure from the bond market. The yield on the 10-year Treasury note touched 5.15 percent on Thursday—its highest level since 2007—before easing to around 5.1 percent by Friday. The 30-year yield climbed above 5.44 percent, a level not seen since 2004.

Semiconductor stocks led the tech charge, extending a rebound that began the previous week as investors positioned for this week’s meeting between President Donald Trump and Chinese leader Xi Jinping in Washington.

The iShares Semiconductor ETF (SOXX) gained 7.43 percent for the week, with AMD shares up nearly 10 percent in a single session and crossing $1 trillion in market capitalization, while Intel shares jumped 13.26 percent for the week. The Nasdaq went on to notch a new all-time high, powered by revived optimism for semiconductors and the broader AI trade.

Meta’s shares also jumped on expectations for its AI agent’s monetization potential, helping lift the Nasdaq and S&P 500. But the same news rattled financials, with the S&P 500 Financials Index falling 1.59 percent for the week on fears that Meta’s AI agent could cut into the investment advisory business.

Oil prices swung sharply on shifting signals from the Iran conflict, and those swings rippled directly into bond yields and stocks. Brent crude fell to around $101.2 a barrel early in the week and dropped below $90 in the middle of the week, as traders hoped for a diplomatic resolution to the U.S.–Iran standoff and watched for signs that oil shipments were flowing through the Strait of Hormuz.

Crude then reversed course, rising above $103 and briefly touching $108 a barrel, after hopes for a deal dimmed following strong statements from both sides at the United Nations, before settling near $104 at the end of the week amid signs the United States and Iran could be working to restore Persian Gulf exports.

Economic data reinforced the case for higher-for-longer rates. A report from S&P Global showed private-sector activity growing at its fastest pace in more than five years in September, led by gains in services and manufacturing.

Initial jobless claims, which track the number of people filing for unemployment benefits, fell to 197,000 in the week ending Sept. 19, from 198,000 the previous week, pointing to continued labor market strength.

Meanwhile, the University of Michigan’s consumer sentiment index inched up to 48.1 in September from a preliminary reading of 47.8, but remained near historically weak levels amid concerns over elevated energy prices.

Analysts React

Strategists argue that the market’s ability to keep climbing despite the surge in yields has been a key story of the week—but one they warn may not hold if rates keep rising.

Emily Bowersock Hill, CEO and founding partner of Lawrence, Kansas-based Bowersock Capital Partners, said equity markets are already trading at relatively high valuations, so there isn’t much room for prices to rise further. Her firm has reduced its S&P 500 target to 7,800 because of rising rates.

“Not only does the market discount future earnings at a higher rate but Treasury yields at this level pose significant competition to equities,” she told The Epoch Times.

“The good news is that the September Federal Reserve rate hike removed some uncertainty from both stock and bond markets,” she added.

“We may have seen the bottom on bonds for the time being, and the removal of rate uncertainty may prove positive for equities as well, potentially offsetting the headwind of higher rates.”

Glen Smith, chief investment officer of Flower Mound, Texas-based GDS Wealth Management, said the market’s resilience this month is notable.

“While there is still some more September to get through, stocks are so far bucking the historical trend of negative performance in September, suggesting that the earnings story that has been driving stocks may be more powerful than previously expected,” he told The Epoch Times.

Richard Reyle, chief investment officer at New Jersey-based Questar Capital Partners, was more cautious, warning that the entire yield curve is now moving against stocks.

“Interest rates are rising at a fast pace, which means the cost of money is rising at a fast pace,” he told The Epoch Times.

“While stocks initially applauded the Fed’s attention to inflation and its action on rates with the September hike, they’re now waking up to the fact that the entire yield curve is rising. This is a negative for bonds and stocks.”

Reyle said stocks have withstood rising bond yields so far, but any further increase in bond yields would be negative for equities.

“While we are seeing very strong earnings growth, that’s already priced in, and a lot of that earnings growth is predicated on the AI trade, which is dependent on companies continuing to spend on AI, which might be hampered if rates rise more,” he added.