Shrugging off war, the bond rout and oil crunch: Why Wall Street keeps rallying

October 7, 2026 — 9:18am

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The US sharemarket hit another record overnight, even as US bond yields reached levels last seen in 2002. There’s something unusual happening in financial markets.

Share prices and bond yields generally have an inverse correlation. As yields go up, increasing the cost of credit and tightening financial conditions while producing near risk-free income streams, the appeal of riskier stocks and their dividends reduces.

That isn’t happening in the US, or at least it is not being reflected in the overall sharemarket indices.

The explanation is obvious. Investors are still piling into the stocks powering the boom in artificial intelligence investment.

The S&P 500 is up just over 14 per cent so far this year, but the more tech-laden Nasdaq index is up more than 18 per cent, and the NYFANG index, which reflects the performance of the biggest of the tech stocks, is up by about 25 per cent.

The significance of the AI-related stocks to the wider sharemarket’s performance is underscored by the underperformance of the S&P 500 equal weight index, which assigns every stock the same weighting, against that of the primary S&P 500 index, which uses their market capitalisation.

The equal weight index has risen 10.8 per cent this year and has actually fallen almost 3 per cent in the past month – the market might be at record levels, but its performance is very narrowly based.

Indeed, only four stocks – Nvidia, Apple, Micron and AMD – account for roughly half the S&P 500’s rise this year. If you look at the market’s performance since mid-August, had it not been for the performance of two of those stocks – chipmakers Nvidia and Micron – the market would have........

© WA Today