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Bond Market Swings Shake Global Stocks, AI Optimism Fuels Wall Street Rally

Thursday brought another round of severe bond market volatility that sent shockwaves through global equity markets, though a powerful surge in artificial-intelligence stocks helped lift Wall Street back onto positive ground. While European indices fell sharply, the U.S. Market managed to end the day higher, breaking a three-day losing streak for the broad index.

According to Associated Press reporting, the S&P 500 added 0.2% on Thursday, snapping a three-day losing streak. The Dow Jones Industrial Average added 21 points, and the Nasdaq composite inched up by less than 0.1%. The session’s gains were powered heavily by AI-driven firms. Micron Technology delivered a stronger-than-expected profit report for the latest quarter alongside upbeat forecasts for upcoming profit and revenue, sending its stock up 3% and extending its stellar year-to-date gain. Nvidia added 1.1% as the single strongest force lifting the S&P 500, and Applied Materials rose 3.5%.

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Outside of technology, consulting and services firm Accenture leaped 15.8% after reporting stronger profit for the latest quarter than analysts expected, seeing growth across regions from the Americas to Asia. These gains helped offset a 4.9% drop for McCormick, which reported a stronger profit for the latest quarter than analysts expected but issued a full-year revenue forecast whose midpoint fell short of Wall Street estimates.

European indices suffered far more dramatic declines. Stock indexes tumbled 1.7% in London, 1.6% in Paris, and 1% in Frankfurt. Analysts and market reports attributed the European sell-off to sharp, punishing moves in bond yields on that side of the Atlantic. The yield on the 10-year French government bond, for instance, shot to nearly 4.95% before veering toward 4.80% and back up to 4.90%.

Asian markets presented a contrasting picture, trading more buoyantly as regional tech companies benefited from enthusiasm surrounding artificial intelligence. Japan’s Nikkei 225 jumped 3.3%, and South Korea’s Kospi climbed 1.9%.

Commodity markets also played a central role in the day’s turbulence. The price of a barrel of Brent crude leaped 4.4% to $102.31 amid ongoing uncertainty regarding when the war with Iran will allow the global oil industry and oil tankers to return to normal operations. High oil prices continued to stoke persistent worries about inflation.

Bond yields remained a dominant focus for investors worldwide. High yields slow the economy by making borrowing more expensive for everyone while undercutting prices for stocks and other investments. Yields have climbed due to concerns over high inflation, solid signals from the U.S. Economy, and governments continuing to spend significantly more money than they bring in. Further economic reports released on Thursday showed that fewer U.S. Workers applied for unemployment benefits last week, while U.S. Manufacturing continued to grow in September. However, a potentially more concerning detail in the report from the Institute for Supply Management showed that price increases accelerated, threatening further pressure on inflation.

The combination of economic signals sent the yield on the 10-year U.S. Treasury toward 5.34%, marking its highest level since 2002. However, the 10-year yield relented later in the day and pulled back to 5.23% from 5.29% late Wednesday. That late-day retreat in U.S. Bond yields helped stocks on Wall Street recover their earlier losses and turn higher. Even after the pullback, the 10-year Treasury yield remains much higher than it was earlier, when it sat below 5%, and well above levels recorded before the war with Iran began, when it was below 4%.

Investors will continue to monitor volatile bond yields, fluctuating oil prices tied to geopolitical conflicts, and incoming corporate earnings reports for signals that could dictate the direction of global equity markets in the sessions ahead.