AI stocks rise even as US 10-year Treasury yield tops 5%. A week of rising interest rates due to economic indicators beating expectations, and this week's PCE and employment data
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The US market last week (September 21–25) was a week where both stocks and interest rates rose simultaneously. Driven by AI and semiconductor-related stocks, the S&P 500 rose 1.2% for the week. On the other hand, as September economic indicators significantly exceeded expectations, expectations for additional rate hikes strengthened, and the yield on the US 10-year Treasury note rose to 5.18% (US Treasury, closing price) on September 24. The momentum of rising stock prices versus the weight of long-term interest rates exceeding 5%. Here is a breakdown of this tug-of-war.
1. US stocks are driven by AI and semiconductors, but the gains are skewed
Conclusion: The three major indices all rose, but there was a difference in the breadth of the gains. The Nasdaq, which has a high weighting of AI and semiconductors, was strong, while the Dow Jones Industrial Average remained only slightly higher.
The rates of change for the week ending September 25 are as follows (CNBC, September 25).
📈 S&P 500: +1.2%
📈 Nasdaq Composite: +2%
➡️ Dow Jones: +0.3%
High-tech stocks, including AI and semiconductors, were at the center of the rise, and the fact that the Dow remained only slightly higher suggests that the gains were skewed toward a specific sector.
2. Why did interest rates rise? Economic indicators that exceeded expectations and “input prices”
Conclusion: The preliminary US PMI for September came in at 57.0 for manufacturing and 58.7 for services, significantly exceeding market expectations, and with the pace of increase in input prices also strengthening, the view that “the Fed might raise rates one more time this year” spread. Long-term interest rates appear to have risen to price this in.
The PMI (Purchasing Managers’ Index) is an indicator compiled by asking corporate purchasing managers whether conditions are “better or worse than last month,” and a reading above 50 indicates economic expansion. The preliminary figures for September (S&P Global) were as follows.
🏭 Manufacturing 57.0 (highest since May 2022)
🏢 Services 58.7
💸 The rate of increase in input prices is at its highest since October 2022
If the economy were just strong, it would be a tailwind for stocks, but the situation changes when rising input prices appear at the same time. This is because rising corporate costs are easily passed on to product prices, making it difficult for inflation to fall. The Fed just raised the policy rate by 0.25% on September 16 to 3.75–4.00% (FOMC statement, vote was 12-0). These figures added to that, strengthening the view of “one more hike this year.” However, this is merely a market view and not something decided by the Fed.
The trend of the US 10-year Treasury yield (closing price, US Treasury) is as follows.
September 22: 4.96% → September 23: 5.11% → September 24: 5.18% → September 25: 5.17%
It can be seen that it rose further around the time of the PMI announcement (September 23).
The 10-year Treasury yield is the “yardstick” for all money, from mortgage loans to stock valuations. If you can expect a yield of over 5% just by holding government bonds until maturity, the reason to take risks and hold stocks relatively diminishes. Even so, AI-related stocks were bought. This is the composition of last week.
3. Crude oil falls back, movements in Europe, Japan, and Taiwan
Conclusion: While WTI crude oil fell about 8% for the week, Brent maintained over $100. Japanese stocks rose, led by AI and semiconductors, and Taiwan’s export orders hit a record high due to AI demand.
🛢️ Crude Oil: Expectations spread as the US and Iran engaged in talks to discuss a phased path including the reopening of the Strait of Hormuz, causing WTI to fall to $92.41 (down 7.87% for the week) at the September 25 close. However, supply concerns in the Middle East remain, and the international benchmark Brent is holding above $100 at $104.32 (Yahoo Finance/Reuters, as of September 25). The divergence in price movement between US WTI and the international benchmark Brent is seen as a result of lingering concerns over Middle East supply.
🇪🇺 Europe: In the two state elections held in Germany on September 20, the CDU led by Chancellor Merz lost significant votes, raising concerns about political uncertainty.
🇯🇵 Japan: Although there were only two trading days due to holidays, the Nikkei 225 was up 2.07% for the week and the TOPIX was up 0.92%, led mainly by AI and semiconductor-related stocks (T. Rowe Price, as of September 25). Similar to the US, the gains were skewed toward AI-related sectors. The yen fell to the 158 level against the dollar at one point, raising concerns about currency intervention.
🇹🇼 Taiwan: Export orders in August were $102.96 billion, up 71.4% year-on-year, exceeding $100 billion for the first time in a single month. Orders from the US were significant at $42.13 billion (+88.9%), reflecting demand for AI and cloud services in the figures (Focus Taiwan, as of September 22, 2026).
④ Focus for this week: PCE Price Index and Employment Report
Conclusion: This week, the August PCE Price Index will be released on September 30, and the September Employment Report on October 2. These are materials to gauge which way the tug-of-war between the ‘strength of AI demand’ and ‘long-term interest rates over 5%’ will tilt.
🛒 PCE Price Index (September 30): This is the price indicator most valued by the Fed. The focus is on how much the ‘rise in input costs’ from last week is reflected in actual prices; if strong, expectations for additional rate hikes will strengthen, and upward pressure on long-term interest rates will likely increase. On the same day, the revision (annual update) of the PCE calculation method, which I covered in the previous article ‘September 30: The Fed’s Price Index Calculation Method Changes,’ will also be announced, and past figures will be rewritten back to 2021. It is important to note that there will be a discrepancy if compared directly with pre-revision figures.
Previous article ‘September 30: The Fed’s Price Index Calculation Method Changes’: https://note.com/godaihk/n/n434f1888132a
👷 Employment Report (October 2): If employment is strong, it will be taken as ‘the economy can withstand rate hikes,’ while at the same time, it will serve as a basis for additional rate hikes along with prices.
I would like to keep an eye on risks in both directions. If prices and employment come in strong, we could see a scenario where long-term interest rates rise further, pushing down stock valuations. Conversely, if they come in weak, expectations for rate hikes will recede and interest rates will likely fall, but it could also be interpreted as ‘the economy is weaker than expected.’
For the time being, the basics will be to look at these two things side-by-side: the figures showing the strength of AI-related demand (movements in semiconductor stocks, Taiwan’s orders, etc.) and how the US 10-year Treasury yield moves around the 5% mark.
Disclaimer
This article is not intended as investment advice. It does not recommend the buying or selling of individual stocks or products, and we ask that you make investment decisions based on your own judgment and responsibility. Investing in stocks, bonds, etc., carries the risk of loss of principal. The information provided is current as of the time of writing (September 28, 2026), and the content may change due to subsequent changes in the situation. Past price movements and trends do not guarantee future performance.
Reference Sources
FRB ‘Federal Reserve issues FOMC statement’ (dated 2026-09-16): https://www.federalreserve.gov/newsevents/pressreleases/monetary20260916a.htm
US Treasury ‘Daily Treasury Par Yield Curve Rates’ (September 2026): https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202609
S&P Global ‘US flash PMI signals fastest growth for over five years in September’ (September 2026): https://www.spglobal.com/market-intelligence/en/news-insights/research/2026/09/us-flash-pmi-signals-fastest-growth-for-over-five-years-in-september
CNBC ‘Stock market news for Sept. 25, 2026’ (dated 2026-09-25): https://www.cnbc.com/2026/09/24/stock-market-today-live-updates.html
NPR ‘Germany’s leader stands his ground after his party loses in state elections’ (dated 2026-09-21): https://www.npr.org/2026/09/21/g-s1-144231/germany-state-elections-merz
Yahoo Finance (Reuters distribution) “Oil prices slide about 2% as US, Iran explore path out of war” (dated 2026-09-25):https://finance.yahoo.com/news/oil-prices-fall-markets-look-011125829.html
T. Rowe Price “Global Markets Weekly Update” (Week of September 25, 2026. As this is a weekly updated page, the content varies depending on the time of access):https://www.troweprice.com/personal-investing/resources/insights/global-markets-weekly-update.html
Focus Taiwan (Central News Agency) “Taiwan’s export orders hit record high in August, surge over 70%” (dated 2026-09-22):https://focustaiwan.tw/business/202609220025