New York Stock Market Reignites AI Rally, Why is the Bond Market Still Unstable?

On the 30th, local time, the New York stock market staged a sharp rebound on the back of Microsoft’s earnings surprise. The S&P 500 rose 1.7%, the Dow Jones Industrial Average gained 1.2%, and the Nasdaq jumped 2.8%, recovering most of the previous day’s losses. Microsoft’s shares surged more than 15%—their largest one-day gain since 2008—after the company reported better-than-expected profits driven by strength in Azure and its AI business. This sparked a broader rally in AI-related stocks, including semiconductor firms. In contrast, Meta fell 8% on weak earnings and plans for increased AI investment, and newly listed Jersey Mike’s closed lower on its first trading day, underscoring the divergence among individual names.

The macro environment remained challenging. U.S. real GDP growth in Q2 slowed to a 1.5% annualized rate, missing forecasts, while the Fed’s preferred PCE inflation stayed in the mid-to-high 3% range—well above the 2% target. Although the Fed held its benchmark rate steady for the fifth consecutive meeting, it emerged that three members had voted for a rate hike, confirming a hawkish undercurrent. As a result, the 10-year Treasury yield hovered around 4.6% and the 30-year yield remained above 5%, reflecting concerns over prolonged inflation.

On the global front, amid the Iran conflict and uncertainty over Middle East oil shipping, Brent crude eased to the mid-$80s per barrel, somewhat easing short-term tensions. However, Korea’s KOSPI—one of the markets most driven by AI expectations this year—has fallen over 30% since July, with bubble worries around Samsung Electronics and SK Hynix coming to the fore. In summary, today’s rally was the “upside story” led by AI and cloud earnings, but bonds, commodities, and geopolitical factors continue to underpin the market’s risk premium from below. From an investor’s perspective, the focus should be on whether corporate profits in the coming quarters can truly offset AI investment costs and whether the Fed will adopt a firmer stance on inflation, rather than on the short-term rebound.