The S&P 500 and Nasdaq reached fresh all-time highs on Tuesday even as the 10-year Treasury yield remained above 5%. The Dow also closed, extending a stock-market rally that has continued despite bond yields being near multi-decade highs.

The 10-year Treasury yield recently reached approximately 5.34%, a level not seen in about 24 years, dating back to the early 2000s. High yields typically pressure stocks because investors can obtain relatively steady returns from government bonds without taking on the risk associated with equities. Higher rates can weigh particularly heavily on expensive technology and growth companies.

Stocks have continued to rise because strong corporate earnings are offsetting some of that pressure. Analysts expect S&P 500 companies to report earnings growth of more than 30% year over year.

🔥BULLISH: S&P 500 hits a NEW ALL-TIME HIGH at 7,844. SPX is up 0.8% as Wall Street bets on a huge AI-driven Q3 earnings season. The index is now worth a record $71.3 TRILLION, up 24% from its March 30 low, helping push the total US stock market above $82 TRILLION. That’s… pic.twitter.com/ZfiRr6V59C — Coin Bureau (@coinbureau) October 6, 2026

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Artificial intelligence companies remain a major source of the earnings growth. Nvidia shares rose again on Tuesday, bringing the company’s market value close to $6 trillion. Other chipmakers also advanced as investors continued to anticipate strong spending on data centers and AI infrastructure.

The rally has also broadened beyond a small group of large technology companies. All 11 S&P 500 sectors traded higher on Tuesday. Utilities and real estate performed well as Treasury yields eased slightly from their recent peak.

Why Treasury Yields Matter

Yields have risen as investors assess inflation, government borrowing and the strength of the economy. Higher Treasury yields can reduce demand for stocks by offering an alternative source of returns. They also increase borrowing costs for companies, consumers and the government. For households, that pressure is already tangible: mortgage rates stand at 7.28% and inflation is running at 3.4%, above expectations.

The effect is especially important for growth stocks because their valuations depend heavily on profits expected far into the future. When interest rates rise, the present value of those future profits declines. So far, however, earnings growth has outweighed that concern.

Some investors are now considering whether a 6% 10-year Treasury yield, rather than 5%, could become the level at which stocks begin to face more significant pressure.

S&P 500 just hit its 28th record high of 2026, crossing $71 trillion in market cap for the first time in history. This is happening despite: 1. 10-year, 20-year and 30-year Treasury yields at 24-year highs 2. Inflation at 3.4%, above expectations 3. Mortgage rates at 7.28%,… pic.twitter.com/84aJu4GJNk — Bull Theory (@BullTheoryio) October 6, 2026

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The outlook for the S&P 500 varies widely among analysts. The index is approaching 8,000, and some strategists say it could reach 10,000 by the end of the decade. Panmure Liberum, however, recently said the benchmark could fall to around 5,000 by the end of 2027, roughly a third below its current level, if inflation and high interest rates persist.

The sharply different forecasts reflect the market’s sensitivity to the competing effects of corporate earnings and borrowing costs. Investors are expected to focus on third-quarter earnings, Federal Reserve comments, inflation data and Treasury yields in the coming weeks.

A strong earnings season combined with easing yields could support a move farther above 8,000 for the S&P 500. Weaker earnings alongside rising yields would present a greater risk to the rally.

For now, record stock prices indicate that investors continue to place greater weight on corporate profit growth than on the cost of higher borrowing rates.

Source: CoinCentral