Capital Market News: Stocks Recover as AI Strength Offsets Rising Yields and Oil

U.S. stocks finished the week higher. The Dow Jones Industrial Average gained 0.3%, the S&P 500 increased 1.2%, and the Nasdaq Composite rose 2.1%. The Nasdaq reached record highs during the week as technology and artificial-intelligence-related stocks attracted strong investor interest.

At the same time, the bond market remained under pressure. The 10-year Treasury yield moved above 5%, while the 30-year yield reached its highest level since 2004. Higher Treasury yields can translate into higher borrowing costs for mortgages, business loans, auto loans, and other forms of credit.

Brent crude remained above $100 per barrel, although oil prices pulled back late in the week. The combination of higher oil prices and rising Treasury yields kept inflation concerns in focus. For businesses and households, the important issue is that the economy showed continued strength while the cost of borrowing remained elevated

Fixed Income Desk

Rising Treasury Yields Keep Borrowing Costs in Focus

The bond market was one of the biggest stories this week. The 10-year Treasury yield moved above 5%, while the 30-year Treasury yield climbed to approximately 5.45%, its highest level since 2004. Treasury yields are important because they influence borrowing costs throughout the economy. When longer-term Treasury yields rise, lenders may also increase rates on mortgages, business loans, and other long-term borrowing.

The Federal Reserve had already raised its federal funds target range by 0.25 percentage point to 3.75%–4.00% at its September 16 meeting. Fed officials have continued to discuss inflation risks and the possibility of additional tightening.

Takeaway: Higher interest rates make borrowing more expensive. Businesses considering expansion or new equipment purchases need to pay attention to both the interest rate and the total cost of financing.

Capital Markets Trend

NASDAQ Stock Exchange

The NASDAQ (National Association of Securities Dealers Automated Quotations) stock exchange was launched in 1975 as the world’s first electronic stock exchange. Unlike traditional exchanges that relied on physical trading floors, NASDAQ, a virtual exchange, introduced a computerized system that allowed for faster and more efficient trading. Broker-dealers make a market in various companies, posting a bid and ask for each stock. This innovation attracted many emerging and technology-focused companies, which is why the NASDAQ is heavily weighted toward the technology sector today.

The NASDAQ stock market is an auction market facilitated by broker-dealers that make a market in various stocks. These market makers post a share quantity and bid price, along with a share quantity and ask price, for specific stocks that they make a market in. This is an open market system, so all participating market makers can see the spread between the bid and ask, as well as the size (quantities) of the market.

Order entry is as follows:

Market Order: Transaction at the best possible price.

Limit Order: Specific price (or better) transaction.

Day: Order for the current trading day, 9:30 a.m.–4:00 p.m. (Eastern Time)
GTC: Good Till Canceled

Buy Stop Limit: Suspended buy limit order
Triggered if the stock trades at the specified price.

Buy Stop: Suspended market order
Triggered if the stock trades at the specified price.

Sell Stop Limit: Suspended sell limit order
Triggered if the stock trades at the specified price.

Sell Stop: Suspended sell market order
Triggered if the stock trades at the specified price.

All or None: Execute the full quantity of the order or none at all.

The trading desk of the broker-dealer will submit an order as directed by the order entry procedure. An investor placing a market order should expect a transaction. There is always a bid and an ask for every actively traded stock. Limit orders are a different matter. Limit orders place limitations on execution because the order specifies an exact (or better) price. For example, if a client places an order to buy 1,000 shares of XYZ at $50 per share, an ask of $50 (or better) must exist. If the stock trades at $50.01, the desk will not process the trade, and the order will post on the system as 1,000 shares bidding $50.

The National Association of Securities Dealers (now part of the Financial Industry Regulatory Authority, or FINRA) created the NASDAQ network in 1971. This network automated the selling of over-the-counter (OTC) stocks, which are not listed on any stock exchange. NASDAQ became a stock market in 1975 when it began listing stocks. NASDAQ changed its name to NASDAQ Stock Market in 1990.

View From Wall Street

Technology Stocks Lead the Market Higher

The stock market ended the week on stronger footing. On Friday, the Dow rose 0.93% to 51,828.62, the S&P 500 increased 0.51% to 7,743.41, and the Nasdaq gained 0.48% to 27,068.72. Technology stocks helped lead Friday’s advance, while energy stocks weakened as oil prices moved lower.

The Nasdaq also reached record highs earlier in the week, helped by semiconductor and AI-related companies. Advanced Micro Devices, Intel, and Arm Holdings were among the companies contributing to the technology rally.

However, the higher cost of money remains an important consideration. With Treasury yields above 5%, investors and businesses are paying close attention to whether economic growth remains strong enough to support higher financing costs.

Takeaway: Stock markets can rise even when borrowing costs are high, but investors continue to watch inflation, interest rates, oil prices, and corporate earnings closely.

Economic Data Recap

Report	What Happened	Why It Matters
Durable Goods Orders	New orders for manufactured durable goods were virtually unchanged at $338.6 billion in August, following a 0.9% increase in July. Orders excluding transportation increased 0.3%.	Durable-goods orders provide a measure of business and consumer demand for longer-lasting products and equipment.
New Home Sales	New-home sales increased 6.4% to a seasonally adjusted annual rate of 684,000 in August, up from 643,000 in July.	Stronger new-home sales indicate continued housing demand, although higher mortgage rates continue to affect affordability.
Jobless Claims	Initial unemployment claims fell to 197,000 for the week ending September 19.	Lower claims indicate that layoffs remained relatively limited and the labor market continued to show resilience.
Consumer Sentiment	The University of Michigan’s consumer sentiment index fell to 48.1 in September, from 51.7 in August.	Lower consumer confidence can signal greater concern about prices, household finances, and the economic outlook.
Inflation Expectations	Consumers’ one-year inflation expectations increased to 4.6% in September, up from 4.0% in August.	Higher inflation expectations can make it more difficult for the Federal Reserve to bring inflation back toward its 2% goal.
Treasury Yields	The 10-year Treasury yield briefly moved above 5.2% during the week before settling around 5.16% on Friday.	Higher Treasury yields can keep borrowing costs elevated for consumers and businesses.
Stock Market	The major stock indexes finished the week higher, with technology stocks and AI-related companies helping lead the gains.	Strong technology performance helped support stocks even as higher yields and oil prices remained concerns.
Oil Prices	Brent crude remained around $100 per barrel during the week, with oil prices moving lower at times as concerns about supply disruptions eased.	Elevated oil prices can increase transportation, manufacturing, and household energy costs and can add to inflation pressure.

What Happened This Week

This week’s economic data showed a mixed picture. New-home sales increased 6.4% in August, while initial jobless claims fell to 197,000, indicating continued strength in parts of the housing and labor markets. Durable-goods orders were essentially unchanged, although orders excluding transportation increased 0.3%.

At the same time, consumer sentiment declined to 48.1, while one-year inflation expectations increased to 4.6%. Treasury yields also remained elevated, with the 10-year yield moving above 5.2% during the week. These developments kept inflation, interest rates, and the cost of borrowing in focus.

Simple Takeaway:

The economy continues to show strength in housing, employment, and business activity, but higher inflation expectations, elevated Treasury yields, and oil prices continue to create financial pressure for businesses and consumers.

What to Watch Next Week

Federal Reserve officials’ comments
Oil and energy prices
Treasury yields
Weekly unemployment claims
September business activity surveys
Consumer confidence
GDP and inflation data
Employment and labor-market data

Business Financing Takeaway

For small businesses and entrepreneurs, this week’s markets provide an important reminder: the cost of capital matters just as much as access to capital.

When Treasury yields and other interest rates rise, lenders may charge more for business loans and lines of credit. A higher rate can increase the monthly payment on equipment financing, commercial loans, vehicles, and other business expenses.

At the same time, the continued increase in business spending on equipment shows that companies are still investing in growth. The August increase in core capital-goods orders was particularly notable because it reflected continued business investment.

Takeaway: Before taking on new debt, businesses should understand the interest rate, monthly payment, repayment period, fees, and total amount that will be repaid.