The Nasdaq rose 1.06% to 27,477.31, while the S&P 500 gained 0.67%. Nvidia and Broadcom each advanced about 2.1%, with Microsoft, Meta and other large technology names also contributing to the rally. Meanwhile, the 10-year Treasury yield reached roughly 5.31%, its highest level since 2002.
Normally, that combination should be difficult for technology stocks. Higher yields reduce the present value of future profits and give investors a more attractive risk-free alternative. The mechanics behind that pressure are particularly important for tech stocks, where valuations often depend heavily on earnings expected years into the future.
Yet AI is currently producing enough earnings growth to offset much of that valuation pressure.
AI Earnings Are Beating the Rate Shock
Investors are entering third-quarter earnings season expecting S&P 500 profits to grow by more than 30% year over year, with AI-linked companies providing a disproportionate share of the increase.
That follows an already powerful earnings boom, where technology profits and AI investment repeatedly exceeded analyst expectations.
For investors, that changes the usual interest-rate calculation. A higher discount rate reduces what future earnings are worth, but rapidly rising actual profits can offset that damage.
Micron, Nvidia and the largest cloud companies have reinforced the idea that AI infrastructure demand is translating into revenue rather than remaining purely speculative.
Fed Fears Are Also Easing
The bond market is not the only rate signal investors are watching.
A weaker-than-expected U.S. employment report sharply reduced expectations for another Federal Reserve hike in October. The implied probability of an increase dropped from roughly 70% to 24%, according to Reuters.
That gives growth stocks some relief even while long-term Treasury yields remain elevated.
Falling oil prices also helped Monday. Brent moved back toward $100 as Middle East exports increased, reducing some concern that another energy shock would force the Fed into a more aggressive inflation response.
The result is a market where AI earnings and lower near-term Fed risk are overpowering the impact of higher long-term yields.
The Record High Is Still Narrow
There is one important weakness beneath the Nasdaq record.
Only about 31.5% of Nasdaq stocks were trading above their 50-day moving averages Monday, while only around 27% of S&P 500 constituents were above theirs.
That mirrors the broader market split seen throughout September, when large-cap technology advanced while most stocks declined.
