- The Nasdaq reached a record high Monday as Nvidia and other megacap technology stocks advanced, while elevated Treasury yields remained a key risk for US equities.
US stocks started the week with another technology-led advance as investors balanced strong artificial intelligence demand against higher borrowing costs and uncertainty over the Federal Reserve's next policy move.
The Nasdaq Composite gained about 1.1% to finish at a record 27,477.31, while the S&P 500 rose 0.7% to 7,773.95. The Dow Jones Industrial Average added 0.2% to 51,267.90. The Russell 2000 also advanced, gaining about 0.5%.
The move extended the strength seen at the end of last week after a weaker-than-expected US jobs report reduced expectations for an immediate Federal Reserve rate increase.
The latest stock market move came as investors entered a week with relatively limited economic data but several important market catalysts, including Federal Reserve meeting minutes and the beginning of the third-quarter corporate earnings cycle.
Nvidia and AI Stocks Keep Driving the Nasdaq
Nvidia Corp. (NASDAQ: NVDA) was one of the biggest drivers of Monday's advance. The chipmaker gained about 2.1% and finished at a record, lifting its market capitalization to approximately $5.76 trillion. Microsoft Corp. (NASDAQ: MSFT) rose 1.5%, while Meta Platforms Inc. (NASDAQ: META) and Tesla Inc. (NASDAQ: TSLA) also advanced.
The gains show how strongly the artificial intelligence investment cycle continues to influence the broader market. Nvidia's performance has become an important indicator for investors assessing whether spending on AI infrastructure remains strong enough to support elevated technology valuations. The company recently returned to record territory, bringing its market value close to $6 trillion, as discussed in recent Nvidia stock coverage.
The broader technology stock rally has also been supported by expectations that major technology companies will continue increasing spending on data centers, chips and AI infrastructure.
That strength has helped the Nasdaq outperform the other major US indexes. According to Reuters, the index's Monday advance came despite the 10-year Treasury yield remaining above 5.2%, highlighting the unusual resilience of growth stocks in an environment that would normally create greater valuation pressure.
The market's concentration in large technology companies is becoming increasingly important. Strong gains from a relatively small group of megacap companies can support major indexes even when higher rates create pressure elsewhere.
Treasury Yields and Earnings Become the Next Market Test
The bond market remains one of the biggest challenges facing stocks. The 10-year US Treasury yield settled around 5.31% Monday, while the 30-year yield also remained elevated. Those levels are close to multiyear highs and continue to raise the return available from government debt relative to stocks.
Treasury yield increases have already become a major theme for investors. Higher yields can increase corporate financing costs and raise the discount rate used to value future earnings, creating particular challenges for companies whose valuations depend heavily on profits expected several years ahead.
Yet the latest market action suggests investors are currently placing greater weight on earnings growth and AI demand.
Oil prices also eased Monday as Middle Eastern crude exports increased and the Group of Seven pledged to boost supplies. Lower energy prices can reduce some inflation pressure, which could make it easier for investors to expect less aggressive monetary tightening.
Federal Reserve expectations shifted following Friday's employment report. Traders have reduced the probability of an October rate increase, although markets continue to price in the possibility of another move later in the year.
The next major test will come from corporate earnings. Third-quarter reporting season begins next week with major US banks, putting financial companies among the first to provide fresh evidence about economic conditions, credit demand and corporate profitability. Investors will also receive the Federal Reserve's minutes from its September meeting later this week.
The setup leaves Wall Street balancing two opposing forces. Strong technology earnings and continued AI spending are supporting stock valuations, while Treasury yields above 5% and persistent inflation risks are limiting the room for monetary-policy easing.
The latest Wealthier Today stock rundown highlighted the same three forces dominating the market: AI spending, elevated oil prices, and Treasury yields. For investors, the question heading further into October is whether corporate earnings can continue to justify elevated equity valuations if bond yields remain high.
So far, the answer from the Nasdaq has been yes. Monday's record close shows that investors remain willing to buy technology stocks despite the rate backdrop. The coming earnings reports will provide a more important test of whether that strength is supported by underlying business results.