Bond yields, AI spending threaten US stocks

The Express Tribune reported that the fourth quarter, usually a firm stretch for US equities, faces pressure this year from a sharp rise in bond yields and doubts about the heavy spending on artificial intelligence. The S&P 500 had climbed nearly 13% in 2026 by Friday and trailed its mid-August peak by roughly 1%. Investors also face the start of earnings season, a pivotal Federal Reserve meeting and the November 3 mid-term elections.

Since 1945, the index has averaged a 4.2% gain in the fourth quarter and risen 85% of the time, according to CFRA. Fourth quarters in mid-term years have been stronger still, averaging 6.4%, which CFRA links to the removal of election uncertainty. Mid-term years have historically averaged a 15% decline, yet the deepest 2026 drop so far has been 9%, per Wells Fargo Investment Institute.

The most immediate concern for equity investors is the 10-year Treasury yield, which touched 5.34% on Thursday, a 24-year peak. Yields have climbed on expectations of solid growth, costlier energy that is lifting inflation, and firms issuing debt to finance AI projects. Higher yields can pull money away from stocks and make borrowing more expensive across the economy, and Chuck Carlson of Horizon Investment Services said a meaningful rally would be a struggle without relief on rates.