Investors have gotten used to climbing the wall of worry with bond yields and oil

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Wall Street’s wall of worry keeps stacking higher but investors keep scrambling over the top.

Coming off the Fed’s first rate hike in three years, the 10-year Treasury yield just pushed through 5.1% for the first time since 2007 while oil prices continue to hover at $100 a barrel. 

That recipe dragged stocks lower across the board Wednesday, though that setup isn’t altogether different from what’s propelled markets forward in recent months.

Crude prices doubled in short order when the Iran conflict kicked off earlier this year while the S&P 500 dropped more than 7%.

But even as oil has stayed elevated relative to pre-conflict months, the benchmark stock index has since gained more than 20% from its April lows and now sits 12% higher on the year.

Bond yields, meanwhile, have similarly remained elevated even before Wednesday’s new multi-year high. 

To be sure, it’s taken a generational technology in AI for investors to repeatedly shrug off soaring oil prices and bond yields.

This isn’t a normal market cycle by any definition. There’s risk in turning too complacent on record earnings and historic hyperscaler spending. 

That said, Nvidia expects to make $100 billion a quarter for the foreseeable future, and hyperscalers including Meta, Alphabet and Amazon together plan to spend roughly $1 trillion a year for five years making sure their AI bet pays off.

Every bet has its limits, though, and neither the Fed nor Big Tech has a say as to what happens in the Middle East. 

"If crude pushes back into triple digits and stays there this time, don't expect equities to shrug it off as easily,” wrote strategists at Bespoke Investment Group in a note Wednesday in response to the latest session’s sell-off.

“If $100 remains max resistance for crude, though, we've already seen just in the last few days that stocks can rally quickly."

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🏦 Fed Governor Barr said more rate hikes are needed. Fed funds futures now imply a better-than-even chance of a 25-basis-point move at the next meeting, with those comments resetting the near-term policy path. (CNBC)

📊 The UK's competition regulator wants Google to let ChatGPT and Perplexity be set as default search on Android. Authorities tied the proposal to its designated strategic market status review of Alphabet in a move that would open the biggest fee moat in tech to AI challengers. (Investing.com)

🛢 Brent crude is holding above $100 as investors continue to await a Strait of Hormuz reopening. Morgan Stanley refreshed its reopening framework and Goldman told clients gasoline sets up better than diesel as refining margins shift. (Reuters)

Nancy Tengler is the CEO and CIO of Laffer Tengler Investments, and she has become a top-1% portfolio manager in the industry. We sat down to unpack her favorite stocks going into 2027, where she sees the bull market headed next, and the biggest risks for the AI trade.

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🗓 September 24, 1869: Jay Gould and James Fisk's attempt to corner the US gold market unraveled on Black Friday when the Grant administration dumped $4 million of Treasury gold into the market.

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