Meta's 12% Surge Drives Nasdaq Record as Oil Slides

The Nasdaq Composite closed at a record 27,122.09 on Monday, gaining 2.26% as investor appetite for artificial intelligence intensified. This rally was driven primarily by Meta Platforms, which surged approximately 12% following positive reception of its Muse AI assistant. The movement in Meta’s stock price triggered a broader rise in semiconductor peers, lifting the index to its highest level since inception.

Simultaneously, crude oil prices dropped sharply, easing near-term inflation pressures. October light crude fell 4.87% to $95.42, while Brent crude hovered near $100.05. This decline in energy costs occurred despite hawkish commentary from Federal Reserve officials, who indicated that further rate hikes might be necessary to control inflation.

Semiconductor stocks lead market gains

The strength in Meta’s shares spread directly to the chip sector, where investors identified key beneficiaries of rising AI demand. Arm Holdings posted the largest gain among major tech firms, rising 17.16% to $322.90. Intel followed with a 12.17% jump to $121.81, while AMD increased 9.95% to $615.52.

AMD’s intraday performance was particularly significant as the company crossed the $1 trillion market capitalization threshold during the session. This concentration of gains in AI-related hardware companies contributed heavily to the Nasdaq 100’s 2.83% increase. The broader S&P 500 also climbed 1.49% to 7,764.69, though the Dow Jones Industrial Average lagged behind with a 0.71% gain.

Treasury yields flatten on oil drop

U.S. Treasury yields exhibited a flattening curve as longer-term rates declined while short-term rates held steady. The 30-year yield dropped 4.67 basis points to 5.2803%, and the 10-year yield fell 4.50 basis points to 4.9510%. In contrast, the 2-year yield edged up 0.75 basis points to 4.7505%.

Market participants appear to be discounting the immediate impact of Fed officials’ calls for higher rates, likely due to the reduction in oil prices. The Bank of Canada’s Governor Macklem noted that U.S. tariffs could halve fourth-quarter growth to below 1%, adding geopolitical uncertainty to the macroeconomic backdrop. Meanwhile, the U.S. dollar strengthened against the Japanese yen and Canadian dollar, with USDJPY reaching 157.39.

Fed officials signal continued tightening

Despite the equity market rally, Federal Reserve policymakers maintained a hawkish stance regarding monetary policy. Governor Michelle Collins indicated that a second rate hike is likely this year, followed by a pause in 2027. Similarly, St. Louis Fed President Alberto Musalem stated that interest rates likely need to rise further to tame inflation, reinforcing the view that the current policy rate is not yet restrictive enough.

These comments align with a broader expectation that inflation remains sticky despite the recent dip in energy costs. The market’s reaction suggests a divergence between bond traders, who are pricing in stable or falling long-term rates, and Fed officials, who continue to prioritize price stability over growth concerns. This tension remains a key driver for short-term volatility in fixed income markets.