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AI-led Wall Street rally faces risk from higher Treasury yields

Softer recent inflation readings lowered expectations of a Fed hike, but traders still price at least one rate increase by year end, keeping pressure on long-duration tech valuations.

Reported · Written up by our desk · Central Banks

LiveMint Markets, citing Reuters, said Wall Street has been pushing to record highs again as enthusiasm for AI spending and big technology investment drives demand for stocks. The piece notes that growth-heavy tech valuations are especially sensitive to Treasury yields because much of their value depends on future profits discounted back into today’s dollars.

Reuters attributed the rally in part to last week’s relatively subdued consumer and producer price readings, which reduced expectations that the Federal Reserve will raise rates when it meets next month. It said the S&P 500 Index reached another all-time high on Thursday, and the tech-heavy Nasdaq 100 Index moved to within 2% of its first record since early June.

The report warned that inflation is still well above the Fed’s 2% target, and traders are pricing in at least one interest rate hike by the end of the year. It added that the yield on the 30-year US Treasury is near the highest level since 2007, and that Thursday’s long-bond auction produced the highest yield since 2001.

With long-term borrowing costs elevated, Reuters said AI-focused companies increasingly face funding pressure as they consider issuing more long-duration debt to support capital expenditures. The article cited bond backstops for Alphabet, Amazon, and Meta, and said Microsoft is among firms projected to spend a combined $740 billion on AI computing infrastructure in 2026 and $1 trillion in 2027, while higher rates raise questions about when investments will generate returns.

Latest closeS&P 500 7,785.76 ▼0.2%|Nasdaq Comp. 26,729.16 ▼0.3%

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