Wall Street gains on tech earnings; bond yields hit multi-year highs

Wall Street indices climbed on Friday amid upbeat corporate earnings from major technology firms, particularly Amazon and Microsoft, which bolstered investor confidence in the artificial intelligence sector. At the same time, longer-term U.S. Treasury yields surged to multi-year peaks, driven by concerns over inflationary pressures linked to rising oil prices. The Dow Jones Industrial Average closed up 0.47 percent to 52,452.14, the S&P 500 gained 0.43 percent to 7,469.60, and the Nasdaq Composite rose 0.55 percent to 25,261.38. However, gains were tempered by a steep decline in Apple shares, which dropped nearly 10 percent following a weak earnings forecast that highlighted challenges in securing essential components due to the strain on global supply chains caused by the AI-driven data center expansion. Microsoft announced robust cash flow projections for fiscal 2027, signaling continued strength in its financial position. Amazon, meanwhile, reported its strongest cloud growth in over four years, offering reassurance to investors who have been closely watching the impact of substantial investments in artificial intelligence. Market analysts noted that these results have reignited interest in neo-cloud companies and their AI initiatives, especially among smaller and medium-sized businesses reliant on cloud infrastructure. Art Hogan, chief market strategist at B. Riley Wealth, observed that there has been a notable shift in investor focus toward AI-related technologies, citing the increased demand for cloud services as a key factor. In contrast, South Korea’s KOSPI index saw a dramatic rebound, surging 17.91 percent to mark a historic recovery. This surge came after the index had suffered heavy losses earlier in the week, reflecting the volatile nature of investor sentiment toward AI-linked equities. Despite the rally, the KOSPI remains approximately 30 percent below its all-time peak, underscoring the ongoing uncertainty surrounding the long-term viability of AI-driven stock performance. Globally, MSCI’s broad equity index advanced 1.06 percent to 1,118.77, while European markets showed mixed results, with the pan-European STOXX 600 falling 0.12 percent and the FTSEurofirst 300 dropping 0.09 percent. The rise in Treasury yields was fueled by hawkish statements from several Federal Reserve officials, including Dallas Fed President Lorie Logan, who emphasized the need for "modest action in the near term" to bring inflation back in line with the central bank’s 2 percent target. This sentiment was echoed by other regional Fed leaders, reinforcing expectations of potential rate hikes. As a result, the yield on the 10-year U.S. Treasury note climbed 7.58 basis points to 4.739 percent, reaching levels not seen since early 2025. Meanwhile, the 30-year bond yield increased 6.43 basis points to 5.2713 percent, marking the highest level since mid-2007. Traders now anticipate a 69 percent probability of a rate increase at the upcoming September Federal Open Market Committee meeting. Oil prices rose sharply on Friday, with traders revisiting concerns over the stability of critical shipping routes such as the Strait of Hormuz. Reports indicating that some tankers had to reverse course in the region heightened fears of disruptions in global energy supplies. Analysts warned that the mechanisms designed to stabilize oil markets are rapidly diminishing, suggesting that future tensions could lead to more severe economic consequences. Shipments through the Strait of Hormuz continue to face interruptions, and the alternative route via the Bab el-Mandeb Strait has also been targeted by Iran-backed groups, exacerbating the situation. Following Japan’s recent intervention to support the yen, the currency strengthened 0.17 percent against the U.S. dollar, trading at 159.27 per dollar. This follows a sharp appreciation on Thursday after the Bank of Japan conducted yen-buying operations, aiming to curb the yen’s depreciation against the dollar. The move highlights the growing pressure on Japan to manage its currency amid shifting global economic conditions and geopolitical uncertainties.