Meta's Muse Propels Mag-7 Higher Despite Rising Yields
U.S. equities rose on Friday as Wall Street wrapped up a volatile week of trading, with a surge in Treasury yields rippling through financial markets.
The S&P 500 climbed 0.51% to close at 7,743.41, while the Nasdaq Composit gained 0.5% to 27,068.72. The Dow Jones Industrial Average advanced 478.64 points, or 0.93% to end at 51,828.62.
Akamai Technologies was a key winner of the session, rising 3% after announcing a multiyear deal with Anthropic.
Also helping sentiment, oil prices slid amid optimism that the Strait of Hormuz could be reopened, as Iran has asked the U.S. to return to the memorandum of understanding from June that failed to end the Middle East conflict. West Texas Intermediate crude futures dropped 2.33% to settle at $92.41 per barrel, while international benchmark Brent crude futures declined 2.14% to $104.32 a barrel.
With the day’s gains, the Dow notched a winning week, up 0.3%. The S&P 500 added 1.2%, while the Nasdaq rose 2%.
That advance was bolstered by technology stocks such as Meta Platforms, which popped nearly 13% on the week amid excitement surrounding its artificial intelligence agent Muse. Information technology rose 3.1%, which was the most of any of the S&P 500′s sectors.
The drama continued in the bond market, where the 10-year Treasury yield climbed to its highest level since 2007, while the 30-year yield reached its highest level since 2004. The two were last seen up slightly at 5.163% and 5.488%, respectively.
This week’s ascent in yields was fueled by hawkish comments from Federal Reserve Governor Michael Barr, persistently high energy prices due to the Iran war, and a hot purchasing managers’ report. Fed funds futures trading suggests a roughly 64% likelihood of a rate hike in October, according to the CME FedWatch tool.
Eric Diton, president of The Wealth Alliance, noted that investor sentiment has been weakening as bond yields have been rising, with bearish sentiment seeing a “sharp” increase from just two weeks earlier. That said, he believes the market has been “incredibly resilient” in the face of the developments, with the S&P 500 and Nasdaq roughly 1% below their recent highs.
“Should rates continue to climb, they should have a larger impact on market performance at some point in the future,” he cautioned.
Meanwhile, traders were monitoring Chinese President Xi Jinping’s visit to the U.S. this week. U.S. Trade Representative Jamieson Greer told CNBC Friday that “a lot more details” on negotiations between the U.S. and China are going to be released Monday.
Treasury Secretary Scott Bessent said earlier in the week that the two countries have agreed to extend their trade truce by two months.
The big story this week was shares of Meta Platforms (META) surging to a new 52-week high as the company released its new Muse Charm device, which is intended to put it ahead of rivals like OpenAI and Google in AI agents and consumer hardware (read more here):
Look at the weekly 5-year chart above, the stock never broke below its 200-week exponential moving average. It was a buy near $500 (its 52-week low was $520 a share). And this week it made a new 52-week high before giving up some gains today (the stock is up 32% over the past month).
I didn't need to listen to the talking heads on CNBC to figure out that it was only a matter of time before this stock turns up. At the end of the day, Meta is a cash cow just off Instagram and it seems like all that spending on AI is finally paying off (but they need to demonstrate they're gaining a foothold in the corporate market).
What else? Shares of Microsoft (MSFT) are up nicely today after CEO Satya Nadella said its cloud-based Autopilot is the 'next generation' of enterprise AI (see his comments here).
Microsoft's share price bounced nicely off its 52-week low of $349 and the stock remains in a bullish uptrend despite the lackluster performance over the past month.
More generally, the Roundhill Magnificent Seven ETF (MAGS), which tracks the performance of the “Magnificent Seven,”is back firmly in bullish mode, breaking out and making a new 52-week high:
Also worth noting the iShares MSCI USA Momentum Factor ETF (MTUM), which holds all the top memory chip makers, is turning back up and looking great again:
This is what we have seen all year: either Mag-7 stocks are doing well or the broader market is doing well but rarely, if ever, both are rallying.
Capiche? this is what you need to pay attention to, never mind bond yields back at 2007 levels and all the scary stories about that.
Can the 10-year US Treasury yield touch 6% this year? Sure it can, and I guarantee you every pension fund in the world will be jumping on them at that point, but I doubt yields will back up a lot more here (because already global allocators are buying bonds and unless you have nasty inflation surprises, not going to happen).
In fact, just looking at the iShares 20+ Year Treasury Bond ETF (TLT), which is a price index, I can tell you bonds are starting to look mighty attractive at these levels (but prices can fall further):
There is a point where global pension funds say, "screw this", we are not being compensated enough to take risks in stocks, hedge funds, private equity, private credit, real estate, infrastructure or other risk assets; we are gong to park our money in bonds and wait for a catastrophe to unfold.
We are not there yet but yields backing up like this is offering interesting opportunities in the fixed income markets.
And don't forget, as long bond yields back up, pension liabilities go down a lot because the discount rate goes up. And if stocks hold up, that's great news.
Alright, let me wrap it up with the top-performing US large cap stocks this week (full list here):
And here are the worst-performing US large cap stocks this week (full list here):
And here is my biotech stock of the week, Viking Therapeutics (VKTX):
Do a deep dive here, only a matter of time before this company gets bought out at much higher multiples (read more here but most articles are terrible, look at the top holders and do your own due diligence).
There are great biotech stocks out there, but I don't get paid enough to share all my secrets.
Below, the CNBC 'Halftime Report' Investment Committee breaks down its reaction to rising Treasurys and what it means for equities.
Also, yields are competing with stocks and the Fed just hiked, but Tom Lee says the market is missing two things: where inflation will be in six months, and which companies actually get stronger as rates rise.
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