Market Overview
US tech stocks, particularly those linked to artificial intelligence, propelled the Nasdaq Composite to a new record high on Monday, October 5, even as US Treasury yields continued to surge and a global bond market rout broadened. The S&P 500 and Dow Jones Industrial Average also closed higher, as investors “looked past” the escalating borrowing costs. One analyst described the tech sector’s resilience, calling it an ‘inverse bond trade’ and an ‘unstoppable juggernaut’.
The global bond sell-off intensified, extending to Europe amid fiscal concerns in France, pushing yields to multi-year highs across major economies. While the immediate likelihood of a Federal Reserve rate hike in October has diminished, the overarching expectation remains for interest rates to stay “higher for longer.” For APAC investors, Australian shares are poised for a positive open, tracking the strong US lead, with eyes on global bond pressures and commodity price movements.
Markets
US Equities
The Nasdaq Composite (^IXIC) reset both its intraday and closing records, advancing 1.05% to 27,477.31. The S&P 500 (^GSPC) climbed 0.66% to 7,773.95, while the Dow Jones Industrial Average (^DJI) gained 0.18% to close at 51,267.90.
Australian Equities
ASX 200 Index futures were pointing up 27 points or 0.3 per cent to 8750 near 7am AEDT, signaling a higher open for Australian shares. The ASX 200 Index (^AXJO) finished its previous session up 0.05% at 8,686.40.
US Treasuries
US Treasury yields ended the session at multi-year highs. The US 10-year Treasury note yield (^TNX) finished at 5.311%, up 3.40 bp, having briefly traded at 5.34%. The US 30-year Treasury note yield (^TYX) stood at 5.665%, gaining 3.50 bp, after reaching 5.7% during the session.
Currencies
The Australian Dollar (AUDUSD=X) strengthened against the US dollar, rising 0.65% to 0.6974.
Commodities
Brent Crude (BZ=F) closed down 2.00% at $100.20 a barrel. Gold (GC=F) edged up 0.12% to $4,167.10 an ounce. Iron ore was reported up 0.5% to $US91.80 a tonne.
What Drove Markets
Tech’s Resilience Amid Rising Yields
Despite the significant advance in US bond yields, tech stocks, especially those associated with artificial intelligence, led the Nasdaq to its record close. Jay Hatfield, founder and CEO of Infrastructure Capital Advisors, described tech as ‘sort of like the inverse bond trade’ and also characterized it as an ‘unstoppable juggernaut,’ attributing its strength to high earnings-related growth and relatively low sensitivity to interest rates, and noting it has served as a safe haven since the pandemic. Conversely, Bank of America (BofA) analysts commented that the ‘easy money’ from the AI trade has ended. S&P 500 companies are expected to report earnings-per-share growth of 27% on a year-over-year basis for the third quarter, a decline from 33% in Q2 2026, according to Goldman Sachs. Citi strategist Beata Manthey noted that “global equities have climbed c12% YTD and are just below all-time highs” despite a “growing list of headwinds.”
Global Bond Rout Intensifies
The surge in US Treasury yields, with the 10-year briefly at 5.34% and the 30-year reaching 5.7%, intensified a global bond sell-off. This rout spread to European fixed-income markets, exacerbated by concerns over France’s fiscal issues. Last week, the Franco-German 10yr spread reached 141bps, widening by 32 basis points, an increase that Deutsche Bank’s Jim Reid noted was the largest weekly expansion in Bloomberg data going back to 1990. France’s benchmark 10-year yield also hit its highest level since July 2002. France is targeting a public deficit of 5% of gross domestic product (GDP) for 2027 through proposed spending cuts of 54 billion euros, with its deficit projected to reach 5.4% of GDP this year and public debt approaching 120% of GDP. BMO expects the US 30-year yield is “heading to 6pc.” In other bond market news, Virgin Media’s bonds sank to a record low.
Evolving Fed Expectations
Traders continued to assess the Federal Reserve’s future policy path, digesting new economic data. The US services sector cooled in September, with the Institute for Supply Management’s Purchasing Managers Index for services coming in at 54.9%, broadly in line with expectations but a modest deceleration from the prior month. However, the measure of prices paid by services businesses accelerated in September to its highest reading since July 2022. Following a surprisingly lackluster jobs report last week, the probability of an October Fed rate hike fell from approximately 70% to around 20%, though a December hike is still seen as possible. NY Fed President Williams remarked that one more hike ‘late this year’ could be warranted, while Fed Vice Chair Jefferson stated that a decision on what to do next on rates ‘may take more time.’
Oil Prices Ease on Supply Signals
Brent crude prices fell, influenced by signs of increased supply. Middle East crude exports reached at least 16.5 million barrels per day in September, returning to pre-Iran war levels, according to Kpler data. This was coupled with the Group of Seven (G7) nations’ agreement to release 100 million barrels of oil and diesel from emergency reserves. These factors outweighed ongoing geopolitical tensions and an offensive pushback by the Saudi Arabia-backed government in Yemen near the critical Bab el-Mandeb Strait.
Stocks to Watch
Several key technology companies contributed to the Nasdaq’s rally:
- SpaceX (SPCX) surged 7.63% to 171.09 following reports of potential cooperation with Taiwan Semiconductor Manufacturing on Elon Musk’s Terafab initiative.
- Taiwan Semiconductor Manufacturing (TSMC) (2330.TW) closed up 3.00% at 2,575.00 amid the same Terafab initiative reports.
- Meta Platforms (META), an “AI hyperscaler,” gained 1.90% to 741.90.
- Microsoft (MSFT), another “AI hyperscaler,” advanced 1.48% to 525.18.
- Nvidia (NVDA) rose 2.12% to 238.90, a key player in the AI trade.
- Tesla (TSLA) climbed 2.20% to 378.73, contributing to the broader tech sector strength.
Brazil’s surging currency also lifted sugar and coffee futures.