Nasdaq Index: 10-Year Backs Off 5%, but AI Trade Remains Broken

Nasdaq Lifts After 10-Year Backs Off 5%

The 10-year hit 5% and backed off. The Nasdaq bounced from its worst levels. That bounce does not mean the same thing as a recovery. The buyers who showed up after yields blinked went into healthcare, staples and software names that do not need faster AI spending to justify the price. They did not go back into chips. Nvidia is still lower. The Philadelphia Semiconductor Index is down nearly 6% in its worst session since July.

The AI trade was already broken before yields hit 5%. The yield spike just widened the selling. The pullback from 5% gave shorts a reason to cover. It did not give buyers a reason to chase the buildout story again.

At mid-session, the S&P 500 is down about 0.6%, the Nasdaq is off roughly 1% and the Dow is lower by about 0.2%.

Daily Nasdaq Composite Index (IXIC) Technical Analysis

The Nasdaq Composite Index is edging lower in the mid-session Monday, however, rebounding from earlier lows. The earlier selling pressure was not as harsh as the overnight trade had predicted. Nonetheless, it remains weak, with three swing bottoms providing nearby support while the 50-day moving average at 26054.71 is acting as resistance.

The main trend is down according to the daily swing chart. Nearby swing bottoms include the minor bottom at 25979.54 and a pair of main bottoms at 25995.53 and 25910.82. The nearest resistance is a pair of main tops at 26644.57 and 26700.68.

A trade through 25910.82 will reaffirm the downtrend. A move through 26700.68 changes the main trend to up.

On the downside, the intermediate range is 24425.34 to 26875.52. Its retracement zone at 25650.43 to 25361.31 is the first major target.

The 5% Mark Drew a Line

The yield story took over at mid-session. The benchmark 10-year briefly pushed above 5%, highest since 2007. Growth stocks were already hit from the AI side. The yield spike added pressure from the discount-rate side. That is two forces working against the most expensive part of the market at the same time.

The bounce started when the 10-year backed away from 5%. That was the trigger and nothing else. Oil above $100 is keeping inflation pressure alive ahead of Wednesday’s Fed meeting with rate-hike odds near 90%. The 10-year does not have to close above 5% to keep the pressure on equities. It just has to keep coming back to that level. And it has been coming back all day.

This Is Rotation, Not Recovery

The midday bounce skipped the names that matter most. Adobe and ServiceNow moved higher. Healthcare and consumer staples caught a bid. The semiconductor group stayed on the floor. That is money moving sideways into defensible names, not money coming back into the growth trade.

A real recovery would include Nvidia, memory stocks, chip equipment makers and the power names tied to data centers. Monday’s midday trade does not show that. It shows traders looking for shelter inside the Nasdaq while keeping their distance from the trade that built the rally in the first place.

The AI Damage Is Not Fixed

Anthropic’s Dario Amodei, OpenAI’s Sam Altman and Elon Musk all backed a slower pace for frontier AI development Monday morning. That is not a spending cut. No hyperscaler has lowered a data-center budget. No chip company has pulled a forecast. Inference demand is still strong and the buildout is still short of computing power.

None of that changes the fact that the three biggest names in the industry just questioned the speed of the race. The market does not wait for the actual spending cut. It trades the risk first. Nvidia and the chip group were priced for faster models, more hardware and another round of capital spending every quarter. A slower capability curve changes the timing of that demand. It may not touch this quarter’s revenue. It can still take the premium out of the stocks today.

Stocks in the News

Intel, AMD, Marvell and Micron are taking the heaviest selling in the semiconductor group. Adobe and ServiceNow are among the few Nasdaq names in positive territory at mid-session. Healthcare and consumer staples are catching rotation flow as traders exit the crowded AI trade.

Oil Keeps the Rate Pressure Alive

Crude is still above $100 after Saudi Arabia shut the pipeline that bypasses the Strait of Hormuz. Energy stocks are catching the supply-risk bid. Technology stocks are paying for the inflation risk. Oil is not the reason the Nasdaq sold off Monday. AI is. But crude above $100 makes the bond-market problem harder to walk away from heading into the Fed meeting. The most expensive part of the stock market does not want yields near 5%, oil above $100 and a Fed chair expected to raise rates on Wednesday. That is the setup and nothing about Monday’s bounce changed it.

What to Watch

The close matters more than the bounce. The chip group has to stop falling and the 10-year has to stay below 5%. If both of those hold into the bell, Monday was a crowded-trade reset. The AI bulls still have demand and inference shortages working for them. The bears have the industry’s biggest names questioning the pace. That is new and the Nasdaq has not absorbed it yet.

The bias leans bearish with the main trend down and the Composite below its 50-day moving average at 26054.71. The swing bottoms at 25995.53 and 25910.82 are nearby support. A break through 25910.82 reaffirms the downtrend and opens the retracement zone at 25650.43 to 25361.31. A move through 26700.68 changes the trend to up with the record high at 27190.21 above it.

More Information in our Economic Calendar.