Customers at a Tesla store in Shanghai, China, September 5, 2023.
Costfoto | Nurphoto | Getty Images
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What you need to know today
The bottom line
Technology stocks staged a comeback, helped by a barrage of good news.
Tesla surged more than 10% after Morgan Stanley upgraded the stock. Meta popped 3.25% as the Wall Street Journal reported the company’s developing a new artificial intelligence system as advanced as OpenAI’s model. Qualcomm jumped almost 4% on the news that it will continue supplying Apple with modems through 2026.
Those moves supercharged the Nasdaq Composite, giving it a 1.14% increase. The S&P 500 rose 0.67% and the Dow Jones Industrial Average added 0.25%, helped by a 1.2% rise in Walt Disney shares after the media giant reached a deal with Charter Communications.
Notably, tech stocks rallied even as the 10-year U.S. Treasury yield climbed around nine basis points to 4.294%. Higher bond yields typically weigh down growth-focused tech stocks because they increase the cost of borrowing and lower the value of future earnings. But tech stocks defied that relationship Monday.
“As investors become more comfortable with a higher rate environment, yields on 10-year Treasuries may not need to fall back into the 3′s for longer duration assets to work,” Goldman Sachs wrote. “Indeed, yields on 10-year Treasuries ranged between 4.5% and 7% back in the late-1990′s in the years when the Nasdaq posted significant outsized gains (CPI inflation was also in a similar range as today, if not lower),” the note continued.
Still, traders might not need to worry about yields hitting an eye-opening 7%, going by a report in the Wall Street Journal. It said Federal Reserve officials are feeling less urgency to raise interest rates as inflation cools down. If true, that means it’s unlikely yields will rise too dramatically, giving stocks more room to breathe.
That’s a big “if,” however. The consumer and producer price indexes, coming out later this week, will put that hypothesis to the test.