October started with a battle between two powerful forces:
AI optimism and historically high interest rates.
For most of Thursday, Wall Street couldn’t decide which one would win.
Stocks initially sold off as Treasury yields surged to levels not seen in more than two decades. But yields eventually retreated, AI stocks recovered, and the major indexes managed to claw their way back into positive territory.
For the day:
📈 Dow Jones: +0.04%
📈 S&P 500: +0.20%
📈 Nasdaq Composite: +0.04%
Those numbers don’t look particularly exciting.
But underneath them was another remarkably volatile day in financial markets.
The 10-Year Treasury Hits Another Milestone
Once again, the biggest story wasn’t really stocks.
It was bonds.
The 10-year Treasury yield surged above 5.3%, reaching its highest level since 2002, before retreating later in the session.
The 30-year Treasury yield climbed as high as roughly 5.66%.
That’s extraordinary.
The bond market just suffered its worst quarter since 1994.
For stock investors, this matters enormously.
When government bonds offer yields above 5%, stocks must compete with an increasingly attractive alternative.
And for companies, borrowing money becomes considerably more expensive.
Mortgages get more expensive.
Corporate financing gets more expensive.
Data centers get more expensive.
Infrastructure gets more expensive.
Which brings us back to artificial intelligence.
Micron Reminds Wall Street Why It Loves AI
Just when investors were starting to question the enormous amounts of money being poured into AI infrastructure, Micron delivered another reminder that demand remains enormous.
The memory-chip manufacturer reported quarterly results that exceeded Wall Street expectations and issued a strong outlook for the coming quarter.
The important story isn’t simply Micron’s earnings.
It’s what those earnings tell us about AI.
AI data centers require enormous quantities of advanced memory.
And according to Micron, demand remains extremely strong.
Supply is also expected to remain tight well into next year.
That suggests the AI infrastructure boom is still very much alive.
Anthropic Could Go Public Soon
Another major AI story emerged Thursday.
Anthropic is reportedly considering an IPO as soon as mid-November.
That would be remarkable timing.
The company is attempting to enter public markets while investors are simultaneously confronting:
Treasury yields above 5%.
Growing concerns about AI safety.
Enormous AI infrastructure commitments.
Questions about AI profitability.
And increasingly complicated financial relationships between AI companies and their suppliers.
Yet investor appetite for AI remains enormous.
Anthropic could provide one of the biggest tests yet.
The $42 Billion AI Circle
Then came perhaps the most fascinating financial story of the day.
Broadcom has agreed to lend Anthropic as much as:
$42 billion.
What will Anthropic use much of that money for?
Computing infrastructure involving Broadcom technology.
In other words:
Broadcom helps finance Anthropic.
Anthropic uses the financing to acquire computing capacity.
Broadcom benefits from Anthropic becoming a massive customer.
Reuters reports that Anthropic has committed to leasing $125.2 billion of computing capacity over five years beginning in 2027, with Broadcom potentially becoming one of the company’s most important suppliers.
This is becoming an increasingly important feature of the AI boom.
AI companies need staggering amounts of infrastructure.
Infrastructure companies want enormous AI customers.
So suppliers are increasingly helping finance the customers who purchase their products.
Is AI Becoming Circular?
We’ve seen variations of this structure throughout the AI industry.
Chipmakers invest in AI companies.
AI companies spend money with cloud providers.
Cloud providers purchase chips.
Infrastructure companies finance AI customers.
Those customers then spend the financing on infrastructure.
None of this automatically means there’s a problem.
Supplier financing has existed in many industries for decades.
But the scale of AI spending makes these relationships worth watching carefully.
If AI revenues eventually justify the spending, these investments could look brilliant.
If revenues disappoint, investors may discover that many supposedly independent parts of the AI ecosystem were financially interconnected all along.
The Labor Market Refuses to Break
Thursday also delivered another surprisingly resilient labor-market signal.
Initial unemployment claims fell to:
197,000.
That’s near a 57-year low.
Claims have now declined for four consecutive weeks.
Meanwhile, Challenger, Gray & Christmas reported that announced layoffs fell 18% in September to 43,281.
That’s encouraging.
Companies aren’t aggressively firing workers.
But they’re not necessarily rushing to hire either.
We’re still seeing something resembling the labor-market environment we’ve discussed repeatedly:
Low hiring. Low firing.
Workers who already have jobs remain relatively secure.
Finding a new job may be more difficult.
Why Wall Street Has Mixed Feelings About Strong Jobs
Normally, low unemployment claims would simply be good news.
But today’s market is different.
The Federal Reserve is still fighting inflation.
And a resilient labor market gives policymakers more freedom to keep interest rates high.
That’s why strong economic data can produce a strange market reaction:
Good news for the economy can become bad news for stocks.
If Friday’s employment report is much stronger than expected, Treasury yields could rise again.
And that could renew pressure on equities.
Oil Remains Another Problem
Treasury yields aren’t Wall Street’s only concern.
Oil remains elevated.
The geopolitical conflict involving Iran continues to disrupt global energy markets, while changes in fuel exports have added another layer of uncertainty.
Higher oil creates several problems simultaneously.
It raises transportation costs.
It increases manufacturing costs.
It pressures consumers.
And most importantly:
It can keep inflation elevated.
That’s precisely what the Federal Reserve doesn’t want.
Nike Is Next
After Thursday’s closing bell, another familiar American company steps into the spotlight:
Nike.
The company is trying to engineer a turnaround after years of disappointing performance.
Its stock has fallen to levels not seen since roughly 2014.
Investors will be looking for evidence that management can stabilize sales, improve margins and rebuild momentum.
But expectations are low.
Sometimes that’s an advantage.
When investors expect very little, even modest improvement can produce a significant reaction.
Tomorrow: The Jobs Report
Now comes the week’s biggest economic event.
Friday’s September employment report.
The stakes are unusually high.
Wall Street wants an economy that’s strong enough to avoid recession.
But not so strong that inflation remains elevated.
Investors want healthy employment.
But not employment growth so strong that the Federal Reserve feels compelled to raise rates again.
That’s an extremely narrow path.
And with the 10-year Treasury already trading above 5%, tomorrow’s report could create another major move in bonds.
The Bottom Line
October began with volatility—but stocks survived.
📈 Dow: +0.04%
📈 S&P 500: +0.20%
📈 Nasdaq: +0.04%
📈 10-year Treasury: briefly above 5.3%
📈 30-year Treasury: ~5.66% at its high
💼 Initial jobless claims: 197,000
🤖 Anthropic potentially targeting a November IPO
💰 Broadcom financing Anthropic by up to $42 billion
💾 Micron delivers another strong AI-demand signal
The contradiction driving this market continues to become clearer.
AI companies want to spend unprecedented amounts of money.
At the same time:
Money hasn’t been this expensive in decades.
Today, AI enthusiasm won just enough of the battle to push stocks into positive territory.
Tomorrow, the jobs report gets a vote.
And once again, the bond market may decide what happens next.
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