Stocks Hold Near Records Despite High Yields and Market Risks

The S&P 500 rose Friday to less than 1% below its record high, while the Nasdaq Composite neared an all-time high. A weak jobs report lowered expectations for a Federal Reserve rate hike this year.

The gains came despite Treasury yields at more than 20-year highs, elevated oil prices, concerns about AI-related risks and weakening market breadth. Sean McLaughlin, chief options strategist at All Star Charts, said stocks had “every reason to sell off” but had not.

McLaughlin pointed to October’s 63% win rate over the past 20 years and said the S&P 500 had averaged an 18.3% return over the next seven months during the past 50 years of the four-year presidential cycle. He also said positive news during the coming earnings season could fuel a rally over the next three to six months.

The 10-year Treasury yield has climbed to its highest level since 2002. Fundstrat strategist Hardika Singh wrote that historical data show valuations begin compressing after yields reach 5.5%.

UBS strategists said higher yields are more concerning when economic growth falters. The firm forecast S&P 500 earnings growth of 25% this year and 14% in 2027, which CIO Ulrike Hoffmann-Burchardi said should help stocks absorb moderately higher rates. She recommended spreading risk across US, European and Asian markets and targeting trends including AI, power and resources, and healthcare.