Stocks have been volatile after a volatile week, as a sharp rise in U.S. Treasury yields, rising expectations for further rate hikes from the Federal Reserve and new strength in technology stocks combined to send stocks tumbling wildly after a volatile week. The tech-heavy Nasdaq rose 2% for the week, leading the major averages, while the S&P 500 rose 1%. The Dow Jones Industrial Average rose 0.3% after spending much of the week in negative territory as concerns about rising interest rates weighed particularly on financial and consumer stocks. Here, we take a closer look at three trends that drove movement in our portfolio last week. Interest rates become an even bigger hurdle for stocks Last week, U.S. Treasury yields rose to multi-decade highs as positive economic data and hawkish comments from the Federal Reserve boosted expectations for further rate hikes. The 10-year yield rose above 5.2%, a level last seen in 2007, and the 30-year yield hit 5.5%, its highest level since 2004. A better-than-expected Manufacturing Purchasing Managers Business Index report on Wednesday showed resilient conditions in manufacturing as price pressures intensified. Normally, strong economic data would be good news, but with inflation still high, it gives the Fed more room to tighten policy. Federal Reserve President Michael Barr added to the concerns by saying that “further policy adjustments will likely be necessary.” Oil was another source of inflationary pressure, with Brent crude rising to $108 a barrel, but it eased after reports that Iran had asked the United States to return to the interim peace deal that did not end the summer war and proposed reopening the strategically important Strait of Hormuz. According to the CME FedWatch tool, market odds of an October Fed rate hike are now 66%, up from about 57% a week ago. Rising interest rates tend to slow economic activity as borrowing becomes more expensive and bonds become more competitive with stocks for investment funds. However, if oil prices continue to fall, this could ease some pressure on inflation and interest rates. Meta’s Muse strategy surprises the market At Wednesday’s annual Meta Connect conference, Meta CEO Mark Zuckerberg laid out plans to build a broader ecosystem around Muse, the company’s fast-growing personal AI agent. Muse has already climbed to the top of the app charts since its release earlier this month, and Meta is now looking to integrate Muse across its hardware and app family to create more uses for and ultimately monetize the technology. The company, the parent company of Facebook and Instagram, plans to make money from Muse through paid subscriptions and eventually take a small commission on transactions completed by agents. New partnerships with Walmart, Best Buy, Gap, and Shopify expand the capabilities Muse can perform autonomously, and new smart glasses, virtual reality glasses, and an experimental Muse Charm give consumers more ways to interact with Muse. The announcement confirms Meta’s potential to transform its more than $100 billion in annual AI spending into a business that goes beyond advertising. Investors are finally starting to give Meta the valuation it deserves. Its stock price rose about 13% last week, making it the second-best performing stock in the portfolio. The stock rose more than 11% on Monday alone, its best day since April 2025, and its market cap is now approaching $2 trillion. Even after the rally, Meta’s forward P/E ratio of about 23x is only slightly higher than the S&P 500. Microsoft’s Turnaround Boosts Confidence Wall Street is coming around to our view that Microsoft has turned a corner. Stifel upgraded the stock to buy last week, while two others raised their price targets. Analysts cited faster growth for Azure and increased confidence in the company’s AI investments. Azure revenue growth accelerated to 43% in Q4 2026 and is expected to increase again this quarter, even as Microsoft maintains its outlook for capital spending. The combination is important. Investors have questioned whether hyperscalers can generate enough returns on their massive AI investments, but Microsoft has shown it can bring more capacity online, accelerate cloud growth, and maintain positive free cash flow. That’s a big change from earlier this year, when concerns about AI disruption, concerns about Copilot and heavy spending on data centers weighed on stocks. Azure has since accelerated again, with Copilot now having over 30 million paid seats. Microsoft stock rose more than 4% last week, turning positive for the year and marking a remarkable comeback for a stock that was down 20%. He has remained firm on the stock since raising his price target to $550 earlier this month. As portfolio director Jeff Marks said Wednesday, Microsoft is “one of the few hyperscalers that is living within its means.” We maintain a Hold equivalent rating of 2 and would like to wait for a better opportunity to add after the rally since July. (See here for a complete list of Jim Cramer Charitable Trust stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. No fiduciary duties or obligations exist or arise from your receipt of information provided in connection with the Investment Club. No specific results or benefits are guaranteed.
