CNBC’s Jim Cramer said Monday that a small number of artificial intelligence giants are masking pressure from surging U.S. Treasury yields, creating an unusual disconnect between stock and bond markets.
of Nasdaq Composite While the stock rose about 1% to close at a record high on Monday, S&P500 It rose 0.66% and ended just 0.3% below its record closing price on August 13th. Their progress came even as U.S. Treasury yields rose to multi-year highs and oil prices fell. of 10 year treasury Although the yield rose above 5.34%, 30 years It approached 5.7%.
The combination broke a familiar market pattern since the outbreak of the Iran war, Cramer said. Typically, lower oil prices should allay inflation concerns and relieve some pressure on yields, but interest rates were still rising on Monday. Nevertheless, the NASDAQ and S&P 500 Meta, microsoft and Nvidia. Meta rose 1.9%, Microsoft rose 1.5% and Nvidia rose 2.1%, securing its highest closing price since May.
“I think there’s tremendous distortion here caused by the very big winners: Nvidia, Microsoft and Meta,” the “Mad Money” host said. Cramer’s Charitable Trust, a portfolio managed by CNBC’s investment club, owns shares in Meta, Microsoft, and Nvidia.
Cramer said these companies have strong catalysts for investors to continue buying despite pressure for higher interest rates. He said Nvidia’s latest chips are delivering significant benefits to customers, noting: space x It’s an effort to generate revenue by renting out large-scale computing clusters powered by Nvidia and their computing power to AI development companies. Meanwhile, Microsoft is benefiting from improved sentiment towards its Copilot AI assistant, and Meta is benefiting from enthusiasm for its Muse personal agent app and the potential to deepen the company’s relationships with small businesses.
Their heavy weight in market-cap weighted indexes means their profits can help lift the S&P 500 and Nasdaq even as rising interest rates weigh on much of the rest of the market. As of Friday’s close, Nvidia alone accounted for about 8.5% of the S&P 500, followed by Microsoft with about 5.8% and Meta with about 2.4%. Together, the three stocks accounted for nearly 17% of the index so far this week.
Cramer said the continued decline in U.S. Treasuries, whose yields have risen as bond prices have fallen, could reflect the government’s large borrowing needs, strong demand for cash to finance data center projects, or short-selling of bonds by hedge funds. Cramer lamented that last week’s weaker-than-expected jobs report, which would normally temper expectations for further Fed rate hikes and push Treasury yields lower, provided no relief for a single day.
The pressure from rising interest rates is showing up beneath the surface of the S&P 500 and Nasdaq. Despite index-level strength, Cramer pointed to weakness in traditional safe stocks and many utilities as evidence that rising yields continue to weigh on much of the market. These are the kinds of stocks that income-seeking investors typically seek, but bonds now offer relatively more attractive dividends than they did a few months ago.
“We own so many stocks in so many companies that interest rates cannot rise to a level where selling bonds is clearly foolish,” he said.
That’s why Kramer doesn’t think the S&P 500 and Nasdaq have all been cleared. He said the bond market could be a better indicator of where Wall Street is heading until the pressure from rising interest rates begins to subside.
“The only conclusion is that the bond sellers so far have not been stupid,” Cramer said. “My money is on them to tell me where we go next.”
