Global markets rattled as bond yields surge, offsetting AI-stock optimism

Renewed volatility in global bond markets weighed on stocks on Thursday, offsetting optimism that the artificial-intelligence rally still has room to run, Reuters reported.

The S&P 500 slipped 0.1% after moving between gains and losses earlier in the session, putting it on course for its seventh decline in eight trading days. At 10:45 a.m. Eastern time, the Dow Jones Industrial Average was down 188 points, or 0.4%, while the Nasdaq Composite was nearly unchanged.

Losses were steeper in Europe, where bond yields jumped overnight. Stock indexes fell 1.7% in London and 1.6% in Paris after the yield on the 10-year UK government bond climbed as high as 5.53%, retreated to 5.37% and then moved higher again.


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Elevated yields can slow economic activity by raising borrowing costs for households and businesses. They can also pressure valuations for stocks and other investments.

According to Reuters, bond yields are rising for several reasons, including concerns about persistent inflation and high oil prices, signs of resilience in the US economy and continued government spending that exceeds revenue.

Those concerns are unlikely to fade quickly. Oil prices rose again on Thursday, keeping inflationary pressure elevated. Brent crude gained 2.8% to $100.76 a barrel as uncertainty persisted over when the war with Iran would ease enough for the global oil industry to return to normal.

Fresh economic reports also suggested that the US economy remains resilient despite multiple challenges. Fewer Americans applied for unemployment benefits last week, potentially signalling fewer layoffs. That followed Wednesday’s data showing that US economic growth in the spring was stronger than previously estimated.

A separate report from the Institute for Supply Management showed that US manufacturing continued to expand in September. More concerning for investors, however, was an acceleration in prices, which could add to inflationary pressure.

The benchmark 10-year Treasury yield briefly approached 5.34% after the manufacturing report before retreating to 5.29%, roughly where it stood late Wednesday. The yield remains near its highest level since 2002, up from below 5% last week and less than 4% before the war with Iran began.

Higher yields can be particularly damaging to real-estate stocks. They raise financing costs and can encourage income-seeking investors to shift from dividend-paying property shares into bonds.

The S&P 500 real-estate sector fell 0.8%, making it one of the index’s worst performers. BXP, which owns office buildings across the US, dropped 1.7%.

Technology stocks helped limit Wall Street’s losses after Micron Technology reported a stronger-than-expected quarterly profit.

The memory-chip maker said growth was accelerating and issued profit and revenue forecasts that exceeded analysts’ estimates. Chief Executive Sanjay Mehrotra said the company was benefiting from AI-driven demand for memory chips.

Micron shares nevertheless fell 1.7%, which some analysts attributed to the stock’s sharp rally ahead of the report. The shares entered Thursday with a year-to-date gain of more than 270%, compared with an increase of less than 12% for the S&P 500.

Other AI-related stocks gained on Micron’s upbeat demand outlook. Nvidia rose 1%, while Applied Materials climbed 4.3%.

Outside the technology sector, Accenture surged 20.3% after the consulting and services company reported stronger-than-expected quarterly profit. The company recorded growth across regions, from the Americas to Asia.

Asian markets outperformed other global regions as Micron’s results fuelled optimism around AI. Japan’s Nikkei 225 jumped 3.3%, while South Korea’s Kospi advanced 1.9%.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)