S&P 500 and Nasdaq approach records as AI rally offsets multi-decade Treasury yields

Equities rise on tech momentum and corporate resilience

US stock indices advanced on Tuesday as the Nasdaq and S&P 500 approached or set fresh records. The S&P 500 rose 0.71% in midday trading toward 7,810 points, nearing its August 13 intraday record of 7,816.70 points. The Nasdaq gained 0.74% after setting a record close in the prior session, while the Dow Jones Industrial Average added 0.75%. Artificial intelligence hardware provider Nvidia rose 2.1% to a market value of $5.76 trillion, closing in on a $6 trillion valuation. Goldman Sachs estimated that consensus forecasts point to 27% third-quarter earnings growth for S&P 500 companies, with more than half driven by AI infrastructure spending.

David Miller, representative of investment firm Catalyst Funds, described corporate performance.

The economy continues to show greater resilience than many had expected, and corporate earnings remain solid.

Interest rate projections shift as bond yields pause

Yields on 10-year and 30-year US Treasury debt hit their highest levels since April 2002 on Monday before stabilizing on Tuesday. Market expectations for a Federal Reserve interest rate hike this month fell following softer employment data. Pricing in swap markets indicated a 23% probability of an October hike, down from 71% measured one week earlier, after policymakers stressed the need for more data.

Kyle Rodda, senior market analyst at Capital.com, noted the primary catalysts behind the market advance.

The rally in the market was tech led once again, with the marginal easing of interest rate uncertainty along with a slight moderation in geopolitical risk allowing market participants to focus on the extraordinary earnings growth being delivered by AI names.

Cash reallocation slows money-market fund inflows

Investor inflows into money-market funds totaled $158 billion across the first three quarters of 2026, down from $823 billion in 2025 and $840 billion in 2024, according to TD Securities. Annual stock market gains of 13% for the S&P 500 and 18% for the Nasdaq reduced the impulse to hold cash, according to Vanguard. Holdings in money funds grew roughly 4% from year-end 2025 through August, compared to an 18% increase across all of 2025, per Investment Company Institute figures. The slower demand pushed 3-month Treasury bill yields nearly 10 basis points above comparable overnight index swaps, while 6-month spreads reached 11.3 basis points. Barclays estimated that the US Treasury will issue roughly $225 billion in bills in October and $160 billion in November.

Sam Earl, rates strategist at Barclays, addressed the shift facing money funds.

If money funds are not getting those inflows, then they have to think about where they want to put their money.

International markets track Wall Street and political shifts

International equities tracked US gains, with Japan's Nikkei rising 0.7% and the MSCI Asia-Pacific outside Japan index adding 0.2%. Rising Japanese government bond yields raised expectations of domestic investors repatriating capital from US and French debt. European stock futures climbed 0.5%, while the euro traded near 17-month lows around $1.116 amid French budget disputes and a snap election called by Spanish Prime Minister Pedro Sanchez. Brent crude hovered near $100 per barrel after declining 1.9% following higher Middle Eastern exports and Group of Seven supply commitments. In Brazil, equities and the real gained as Senator Flavio Bolsonaro advanced to a presidential runoff against Luiz Inacio Lula da Silva.