Market Lab Report - Soaring bond yields vs stocks

Why tech stocks are shrugging off 19-year-high yields

Nobody in January priced stocks up ~13% while the 10-year jumped 100 basis points to a two-decade high.

Higher yields are supposed to crush equities. That only bites when earnings are weak. This year they have not been. Record profits carried the valuation math. Stocks got cheaper even as the 10-year ripped.

The equity risk premium has barely moved since January. That is the tell.

Morgan Stanley’s Andrew Sheets calls this a mid-cycle tape: rates rising into a hot market. Investors raise growth expectations faster than bonds can scare them. Median S&P EPS growth is tracking mid-teens. Revisions sit near cycle highs.

Since 1998, the earnings-to-bond-yield gap has explained only about 10% of stock-vs-bond returns over the next 12 months. Three years out, about half. Short-term yield spikes have almost no short-term predictive power.

Markets are arguments about the future, not equations. Strong growth gets the benefit of the doubt. That is why 5.1% Treasuries have not broken tech stocks — yet.

Price and volume on leading tech names still decide. Earnings can keep the party going until leadership fails.

Judy Shelton will work alongside Scott Bessent who wants to link gold to treasuries which would be bullish for the long bond.

Near-term catalysts for where tech centric major indices such as Nasdaq Composite will head:

Friday, October 2: the September jobs report. A hot wage print would likely push yields higher and stocks lower. A soft print could ease the pressure.

Later in October: CPI (around October 14) and the October 28 FOMC. Markets are leaning toward a pause in October, with another hike still possible later if inflation stays sticky.

Earnings season starts in earnest in the second half of the month. Hyperscaler capex commentary is the bigger swing factor than the next two sessions.



Largest stock buyback

**Nvidia just super-sized the buyback.**

World’s largest company added **$150 billion** — the biggest single increase on record — lifting total authorization to **$235 billion** through fiscal 2028. NVDA ticked higher.

That one bump is larger than any full buyback Apple, Microsoft, Meta, or Alphabet has ever launched. It tops Apple’s $110 billion increase in 2024 by about Ford’s entire market cap.

Not the first expansion. Roughly $10 billion bought back in fiscal 2023, then +$25 billion later that year, then +$50 billion in August 2024.

Jensen: cash generation funds the AI buildout *and* capital returns. The authorization is a vote of confidence in the long-term opportunity.

That said, Nvidia saying it can spend another $150 billion buying its own stock is not the same as the stock going up. It is only permission to buy, and the company can stop whenever it wants. Even if it spends the whole $235 billion still allowed, that is only about 4% of the company, so each share gets only a small boost. The plan also needs Nvidia to keep making huge amounts of cash through early 2028, and a lot of that money is still owed by customers buying AI chips. If those customers slow down, the buyback does not fix that. Buying your own shares only helps if the price is a good deal, and Nvidia’s price is still enormous even if it looks cheaper than before compared with its profits.