Wall Street is rising as the pressure that’s built on stocks recently from the bond market relaxed a bit.
Big Tech stocks and others that benefit from easier interest rates led the way. They got some relief as the 10-year Treasury yield eased back further from its highest level since 2007 after a report suggested the surprisingly resilient US economy may be cooling in August.
The announcement set off a rush across Wall Street. Stocks of AI-related companies soared, and investors tried to count how many times a CEO could mention “AI” in an earnings call. Nvidia’s stock has more than tripled this year so far, and it will need to meet the much higher expectations around it to justify its big move.
They’ve been under more pressure recently, as yields crank higher in the bond market. When bonds are paying more in interest, investors feel less need to pay high prices for stocks and other investments that can swing sharply in price.Treasury yields eased Wednesday, taking off some of that pressure. The 10-year Treasury yield fell back further from its highest level since 2007, down to 4.20 per cent from 4.33 per cent late Tuesday.
For now, softer-than-expected data on the economy may be good for markets. That’s because a string of surprisingly strong reports recently has raised expectations for the Federal Reserve to keep interest rates higher for longer. The Fed has already hiked its main interest rate to the highest level since 2001 in hopes of grinding down high inflation.
The hope among traders has been that the Fed has already hiked rates for the final time this cycle and that it will begin cutting rates early next year. But such hopes have been diminishing with each stronger-than-expected report on the economy that’s come in recently.The two-year Treasury yield, which closely tracks expectations for the Fed, has also jumped recently, though it eased back like the 10-year yield on Wednesday. It fell to 4.95 per cent from 5.05 per cent.
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