AI appetite drives Nasdaq Index to new record high
Last Tuesday the tech-heavy US Nasdaq 100 Index closed at a new record high after surpassing its previous intraday high set back in early June. The reviving appetite for technology stocks came against a backdrop of retreating oil prices, the success of Meta’s new AI assistant ‘Muse’, and reports of China/US AI talks.
Shares in Meta gained north of 11% on Monday after Muse became the most downloaded free app on Apple’s App Store. This helped restore interest in technology stocks, which have struggled since June in the face of rising oil prices and bond yields (which increases the cost of their borrowing). Although bonds yields continued to climb, oil prices eased amid encouraging news from Saudi Arabia and a later ceasefire proposal from Iran. By Friday’s close, the Nasdaq 100 Index was up over 24% in sterling terms in 2026.
US bond yields hit new post-2004 high
The ongoing rise in US government bond (Treasury) yields continued last week with a further sell-off on Friday driving the yields on longer-dated Treasuries to new highs (meaning their prices fell). The yield on 30-year US Treasuries hit a new post-2004 high of 5.53% while the yield on 10-year Treasuries, a key global benchmark, touched 5.23% before easing slightly.
The rising yields reflect a backdrop of increasingly strong US macro-economic data, ever-mounting US debt levels, persistent inflation, and rising expectations of a second Federal Reserve (Fed) rate hike next month. A stronger than expected consumer sentiment reading on Friday was all it took to trigger the latest bond market sell-off. Thanks to accelerating economic data and ‘hawkish’ rhetoric from the Fed (supporting rate hikes) market expectations of a second US interest-rate rise in October sailed past 70% last week.
US PMI hits five-year high
The latest S&P Purchasing Managers’ Index (PMI) data showed a boom in US business growth which surged to its fastest for more than five years amid signs of strong employment growth. Last week’s ‘flash’ (meaning an advanced forecast) PMI reading for September composite output came in at 58.4, significantly up from August, at a 62-month high. Any PMI reading above 50 shows business growth while a sub-50 reading indicates contraction.
According to S&P, US services PMI hit a 59-month high (58.7), manufacturing output was at a 53-month high (56.7), while manufacturing PMI was at a 52-month high (57). This marked a fourth consecutive month of business activity growth amid signs of strong employment gains.
Employment rose sharply in September, with US firms adding new jobs at the highest clip in over four years in response to rising demand and increasing order book backlogs.
