Wall Street Morning Briefing: The AI bull market faces a reckoning over interest rates, investors begin shifting to defensive assets, and 30-year Treasuries pose the next test

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Long-term yields hit their highest levels since 2002; oil prices fluctuated at elevated levels, while gold and silver came under pressure
All three major U.S. stock indexes closed lower: the Dow Jones Industrial Average fell 0.66%, the S&P 500 dropped 0.22%, and the Nasdaq Composite slipped 0.22%, ending a five-session winning streak. The Russell 2000 fell 1.31%, as small-cap stocks remained under pressure, with rate-sensitive assets bearing the brunt.
Pressure came from the bond market: the 10-year U.S. Treasury yield briefly touched 5.36% intraday, its highest since 2002, and closed at around 5.28%. The 30-year yield surged to 5.732% intraday, also reaching its highest level since May 2002. Renewed fiscal concerns in France widened the French-German 10-year yield spread to around 140 basis points, while the U.K. 30-year gilt yield briefly rose to 6.04%, a 28-year high. A global bond sell-off swept across the Atlantic, directly pushing up discount rates.
The $39 billion 10-year Treasury auction was the only respite of the day. The high yield was 5.300%, the highest since November 2000, but the bid-to-cover ratio of 2.77 was the strongest since 2016, with foreign demand near a record and the non-dealer allotment share at an all-time high. Yields briefly fell after the auction, and stock losses narrowed. Goldman Sachs head of rates strategy William Marshall remains optimistic that yields will fall to 4.75% before year-end. Barclays, however, raised its third-quarter 2027 forecast for the 10-year yield to 5.25%, saying that with the economy resilient, there is little catalyst for yields to fall below 5%. But the bond market is not out of danger: at 1:00 a.m. on October 9, the U.S. will auction $22 billion in 30-year Treasuries, the next major test. Weak demand could send long-term yields higher again and put further pressure on U.S. stocks.
The minutes of the Fed's September meeting were hawkish. All 19 officials supported a 25-basis-point rate hike to 3.75%–4%, and most participants saw another increase before year-end as potentially appropriate. The minutes stressed that inflation remains elevated, with geopolitical factors pushing up oil prices and a surge in AI investment adding to pressure. A New York Fed survey showed one-year inflation expectations rising to 3.9%, a more-than-three-year high, while household financial expectations worsened. Markets are currently pricing in about a 22% chance of a rate hike in October and still assign a high probability to another hike by year-end.
U.S. media report that the Pentagon has instructed U.S. Central Command to prepare for a resumption of large-scale military operations against Iran. Trump is weighing the timing, and action could come before the November 3 midterm elections or even Israel's elections. Potential targets include energy, infrastructure and nuclear facilities. Brent crude remains above $100 a barrel, while WTI fluctuates in the $88–$90 range. IMF Managing Director Kristalina Georgieva warns that even if fighting in the Gulf ends soon, high oil prices could persist through 2027. Attacks on oil tankers have hit a weekly record, and the cost of sending a very large crude carrier to Asia has surged to $77 million, significantly raising supply-chain costs.
The U.S. Dollar Index rose about 0.4% to around 102.27, while the euro neared a 17-month low of 1.12. A stronger dollar and high interest rates weighed on precious metals: spot gold fell about 1.3%, hitting an intraday low of $4,066, its lowest since August 5; spot silver fell about 2.6%. Taking advantage of the decline in gold prices, China's central bank bought gold for a 23rd consecutive month, taking reserves to 77.47 million ounces at the end of September. Peter Grant, a strategist at Zaner Metals, said the market signal is that rates will remain high for longer, supporting the dollar and Treasury yields, though official-sector buying remains a medium-term support for gold.
Defensive sectors lead as AI and semiconductors continue to devour capital
Defensive sectors such as healthcare, consumer staples and utilities performed relatively well, while industrials and materials led the declines. Goldman Sachs' trading desk reported notably heavy selling flows for the day, with long-only funds' selling skew reaching -25%, concentrated in macro products and technology stocks. Hedge funds' short-selling ratio rose to a near two-week high. Quality stocks surged, while shorted stocks fell to their lowest level in more than two months, as the market began rewarding companies with healthy balance sheets.
The AI financing boom continues to devour capital. Broadcom is seeking more than $50 billion in financing for custom AI chips for OpenAI, with Apollo, Blackstone and others in discussions. The project is internally known as “Nexus,” and the first- and second-generation chips are codenamed Jalapeño and Serrano. Oracle is in talks with Apollo and Goldman Sachs about chip financing. SpaceX is seeking about $40 billion to buy Nvidia chips, comprising roughly $10 billion in bank loans and $30 billion in investment-grade bonds. Apollo is expected to lead, with Pimco participating. Dan Ives of Wedbush gives SpaceX an “Outperform” rating and a $225 price target, saying that issuing bonds to secure Nvidia chips can strengthen the flywheel connecting launches, Starlink and AI.
Samsung's third-quarter operating profit was about 107.4 trillion won, up 783% year over year, topping 100 trillion won for the first time and setting a record for the fourth consecutive quarter. Revenue was about 195 trillion won, up 127% year over year but below expectations. The memory supercycle is the main driver: supplies of conventional DRAM and NAND are tight, while HBM demand is strong. Counterpoint raised its forecast for third-quarter DRAM price increases from 5%–10% to 10%–20%. Douglas Kim of Douglas Research estimates Samsung's HBM bit shipments rose nearly 50% quarter over quarter. Samsung will release its full earnings report on October 29.
TSMC will report September revenue today at 1:30 p.m. August revenue was about 514.8 billion New Taiwan dollars, up 53.3% year over year and 10.1% month over month. Citi initiated a 90-day catalyst watch on TSMC, expecting strong results. AMD CEO Lisa Su visited South Korea for the second time in seven months and publicly confirmed for the first time that SK Hynix will supply HBM4 for AMD AI accelerators. Each MI455X chip features 432GB of HBM4, 50% more than the previous generation. She said AMD is seeking partnerships with Samsung and SK Hynix lasting “three to five years or even longer.” Samsung hopes to use HBM supply to expand into wafer foundry services, but AMD is taking a cautious stance.
AI models and devices continue to advance. OpenAI officially launches GPT-6, with Sol for paid users and Luna for free users; jailbreak defenses and refusal rates for high-risk requests improve. Anthropic releases Claude Haiku 5.5, with average operating costs about 75% lower than Haiku 4.5. Microsoft launches the Surface Laptop Ultra, powered by Nvidia RTX Spark, starting at $2,599 and shipping October 16, and introduces its AI agent product, Scout. Nvidia and Microsoft partner to run AI agents natively on Windows PCs. Nvidia also plans to invest an additional $1 billion in humanoid robotics company Figure.
Healthcare also continues to attract attention. Barclays initiates coverage of medical technology with a broadly bullish view. Christopher Pasquale names Stryker and Edwards Lifesciences as his top large-cap picks, with price targets of $375 and $110, respectively; Abbott has a $120 target, GE HealthCare $85, and Intuitive Surgical $485. He says medical technology valuations are at their lowest in a decade, with the largest discount to the S&P 500 since the peak of the tech bubble. The IHI ETF has fallen nearly 19% over the past five years, while the S&P 500 has risen nearly 77%. The healthcare sector rose 1.06% on the day, leading U.S. stocks.
Goldman Sachs data show Micron is expected to contribute 19% of S&P 500 third-quarter earnings growth, and Nvidia 15%; together, their incremental contribution is roughly equal to that of the other 490 index constituents combined. Scott Rubner of Citadel said bluntly, “The stock market is not the economy, and it is becoming increasingly clear that the S&P 500 does not represent the average stock either.” Deutsche Bank's Henry Allen warned that bonds and equities are pricing in “fundamentally different macro regimes,” a divergence that is unlikely to persist.
Earnings season is the next key test, with JPMorgan, Citigroup and Wells Fargo leading off next Tuesday. Bob Doll of Crossmark says rising interest rates have compressed valuations by three P/E multiple turns, but strong earnings have masked the effect. Mark Hackett of Nationwide says, “The higher interest rates go, the less stocks are worth.” Keith Lerner of Truist says small-cap stocks are more sensitive to interest rates. Steve Sosnick of Interactive Brokers says that GDP growth of 2.2% does not necessarily mean every boat will rise with the tide.
A “liquidity vacuum” emerged in the South Korean market. Samsung and SK Hynix wound down roughly $40 billion in combined buybacks ahead of schedule, having absorbed more than $25 billion in selling pressure on their own over the past two months. On the first day after the buybacks ended, the KOSPI fell 2% and dropped below 7,000. Foreign investors were net sellers of $1.9 billion; Samsung fell 1.3% and SK Hynix 2.8%. Goldman Sachs' Heather Oh warned that earnings guidance, semiconductor ETF rebalancing, options expirations and the end of buybacks could combine to trigger significant volatility in Samsung. Cho Junkee of SK Securities said volatility may rise after the buybacks end.
Specific company developments and stock moves:
Micron Technology closed up 4.06%. Gil Luria of D.A. Davidson raised his price target from $2,100 to $3,000, citing an undersupply of memory that is expected to continue into 2027 and 2028. Memory stocks were mixed: SanDisk rose 1.92%, SK Hynix fell 2.36%, and Western Digital dropped more than 1%.
Caterpillar plunged 5.77%, leading blue-chip decliners. The U.S. Federal Trade Commission and Department of Agriculture jointly announced an investigation into the market practices of agricultural machinery manufacturers. Industrials led sector declines, down 2.14%; Honeywell International fell 2.24% and Sherwin-Williams 1.95%.
TSMC fell 2.09%, while the Philadelphia Semiconductor Index dropped 1.15%. The company will report September revenue today at 1:30 p.m. August revenue rose 53.3% year over year and 10.1% month over month. Citi initiated a 90-day catalyst watch. Intel rose 0.55%; ARM fell 2.71%, Qualcomm 2.16%, TSMC 2.10%, ASML 1.59%, and AMD 0.55%.
Broadcom closed up 0.19%. The company is seeking more than $50 billion in financing for custom AI chips for OpenAI, with Apollo, Blackstone and others discussing participation. The project is codenamed Nexus. The Philadelphia Semiconductor Index fell 1.15%, and optical communications stocks broadly declined: Coherent fell 1.12%, Lumentum 1.97%, and Corning 3.39%.
SpaceX closed down 2.51%. The company is seeking $40 billion in financing to buy Nvidia chips, with Apollo expected to lead and Pimco participating. Dan Ives rates it “Outperform” with a $225 price target. The space and satellite theme remains hot: Jeff Bezos said Blue Origin could go public in the next few years, while an FCC auction of “golden spectrum” could benefit Amazon and SpaceX.
AMD closed down 0.55%. Lisa Su visited South Korea and confirmed that SK Hynix will supply HBM4. The MI455X will feature 432GB of HBM4. AMD is seeking partnerships with Samsung and SK Hynix lasting three to five years or even longer; Samsung wants to expand into foundry services, but AMD is cautious.
Apple closed up 0.91%. Dan Ives named Apple his top tech stock for 2027, with a $400 price target, expecting AI to drive device upgrades and services growth.
Microsoft closed up 0.09%. The company launched the Surface Laptop Ultra, starting at $2,599 and shipping October 16, and introduced its AI agent, Scout. Nvidia and Microsoft are partnering to run AI agents natively on Windows PCs. Dan Ives has a $650 price target.
Nvidia closed down 0.74%. Jensen Huang and Satya Nadella unveiled previews of RTX Spark and DGX Station for Windows. The company plans to invest an additional $1 billion in Figure. Dan Ives has a $300 price target, calling Nvidia “the foundational computing platform for the AI economy.”
Intel closed up 0.55%. CEO Lip-Bu Tan said the company will continue working with Elon Musk on the Terafab project, but Musk is also discussing a partnership with TSMC, denting investor confidence.
Wolfspeed rose nearly 20% after hours. The U.S. Department of Defense is considering a $1.5 billion loan in exchange for warrants for up to a 7.5% stake, supporting domestic production of silicon carbide and power devices. The policy news provided a catalyst for related silicon carbide and power semiconductor stocks.
 
Coming up:
October 8 (Thursday)
1:30 p.m.: TSMC September revenue; Samsung's preliminary third-quarter results are out;
A-shares resume trading; the PBOC makes a net injection of 200 billion yuan through 1.2 trillion yuan in outright reverse repos; the Ministry of Finance auctions 150 billion yuan of five-year special treasury bonds;
8:30 p.m.: U.S. initial jobless claims for the week ended October 3;
Nobel Prize in Literature announced.
October 9 (Friday)
1:00 a.m.: U.S. 30-year Treasury auction, with $22 billion in bonds due August 15, 2056, and a 5.125% coupon; the Treasury will then buy back up to $6 billion of 20- to 30-year bonds. Strong demand could temporarily ease pressure on long-term yields; weak demand would put high-valuation tech stocks under renewed pressure.