US stocks experienced a volatile trading session on Friday morning, as the 10-year Treasury yield (^TNX) surged to its highest level since January 2025, amidst a backdrop of increased uncertainty surrounding the Federal Reserve’s interest rate decisions.
Market Reaction
The tech-heavy Nasdaq Composite (^IXIC) witnessed a 0.4% increase, following an initial rise of as much as 1% after a jump in South Korea’s KOSPI (^KS11) index. In contrast, the Dow Jones Industrial Average (^DJI) rose by a modest 0.1%, while the S&P 500 (^GSPC) also added 0.1% to its value.
The volatile market conditions were largely driven by the surge in the 10-year Treasury yield (^TNX) to 4.73%, its highest level in over a year. This development has significant implications for the broader economy, as it reflects the increased uncertainty surrounding the Federal Reserve’s decision to hold interest rates steady without providing forward guidance.
Big Tech’s AI Spending
The latest quarterly results from the ‘Magnificent Seven’ companies – Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), Meta (META), Alphabet (GOOGL), Facebook (FB), and Google (GOOG) – reassured tech investors who had grown fearful of a slowdown in AI and higher interest rates. The four hyperscalers – Amazon, Microsoft, Meta, and Alphabet – forecasted cumulative spending of $720 billion to $745 billion on capital projects in 2026, a testament to their continued commitment to investing in artificial intelligence.
The historic 15% stock rally in Microsoft’s (MSFT) shares was followed by similar movements in Amazon (AMZN) and Apple (AAPL) stocks after they delivered earnings on Thursday. Amazon’s stock jumped 13% after its earnings beat expectations and its chip business expanded, while Apple’s stock fell 9%, as its Services and China revenue came up short.
The surge in oil prices, which rose to $85 per barrel for US benchmark WTI crude futures (CL=F) and $90 per barrel for global benchmark Brent (BZ=F) futures, weighed heavily on consumers’ budgets and contributed to the depressed sentiment. However, the latest check on how Americans are feeling from the University of Michigan showed a broad pickup in sentiment.
Oil Companies’ Earnings
A slew of oil companies, including ExxonMobil (XOM) and Chevron (CVX), reported windfalls in Q2, as the US-Iran war and the subsequent energy shock have kept oil prices elevated. However, scheduled maintenance costs ate into Exxon’s bottom line, leading earnings to miss expectations.
The oil price volatility is expected to continue, as traffic in the Strait of Hormuz began to falter following a recent reescalation in hostilities. This development has significant implications for the global energy market and is likely to contribute to further price increases.
