To The Moon

Tuesday delivered another reminder of who’s really in charge of this market: the bond market. Equities tried to mount a midday rebound, but rising long‑term yields ultimately kept stocks pinned in the red.

• Dow: –0.26%

• $S&P 500(.SPX)$ : –0.17%

• $NASDAQ(.IXIC)$ : –0.09%

All three benchmarks traded much lower earlier in the session before staging a partial recovery. The catalyst for that brief optimism was a set of comments from New York Fed President John Williams that traders interpreted as slightly more dovish. Combined with cooler‑than‑expected jobs data, rate‑hike odds for October fell sharply, from 71% to roughly 52%, and 2‑year yields eased.

Oil also helped sentiment:

• Brent: near $96

• WTI: back below $90

But none of it was enough to counter the gravitational pull of surging Treasury yields.

Long‑Term Yields Hit Levels Not Seen in Decades

The bond market’s message was unmistakable: financial conditions are tightening fast.

• 30‑year yield: 5.623%, highest intraday level since 2002

• 10‑year yield: nearly 5.3%

Equities are stuck in a holding pattern between earnings seasons, and the jittery intraday swings show just how hungry investors are for any new information that might break the stalemate.

Sector Snapshot

• Hot Stock: $Carnival(CCL)$ +13%

• Biggest Loser: $Fair Isaac(FICO)$ –27%

• Best Sector: Utilities +1.1%

• Worst Sector: Energy –0.9%

Utilities benefited from defensive positioning, while energy cooled as crude prices dipped.

AI: The Market’s Backbone - and Its Biggest Vulnerability

For months, AI has been the engine of the bull market. But what happens if that engine sputters?

The S&P 500 sits less than half a percent from its all‑time high despite:

• multi‑year highs in Treasury yields,

• elevated oil prices,

• and persistent geopolitical risk.

Bank of America’s Equity Derivatives team argues that the real risk isn’t macro, it’s the AI trade itself. With investors aggressively buying every dip in AI names (“the AI‑put”), other risks have been overshadowed.

Their warning: If AI sentiment cracks, the market loses its strongest hedge against fiscal and macro uncertainty.

History shows how fragile AI enthusiasm can be. The 2024 DeepSeek episode, when a Chinese open‑source model spooked markets, wiped 17% off $NVIDIA(NVDA)$ in a single day.

Meanwhile, beneath the surface, the median S&P 500 stock is 16.7% below its 52‑week high. AI strength is masking broad weakness.

If that support disappears, the downside could be far more severe than anything yields or oil have thrown at markets this year.

On Deck Today

• Earnings: Cal‑Maine Foods, Conagra Brands, FactSet, $Micron Technology(MU)$

$MU

• Macro:

  PCE inflation (August): headline expected at 3.7% YoY, core at 3.3%

  Final Q2 GDP: expected to hold at 1.5% SAAR

With inflation still far above the Fed’s 2% target, and core PCE stuck above 3%, policymakers remain under pressure, and markets know it.

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This summary is for informational purposes only and does not constitute financial advice. Investors should conduct their own research before making investment decisions.

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