Nasdaq Hits Record as Meta Jumps 12% on AI App Success

The Nasdaq 100 index posted its strongest performance since early August on Monday, surging 2.8% to close at a record high. This rally occurred despite the Federal Reserve raising its benchmark interest rate by 25 basis points last week to a target range of 3.75%-4.00%, the first increase since 2023. Investors appear to be prioritizing strong earnings growth from artificial intelligence infrastructure over the impact of tighter monetary policy.

Meta Platforms led the advance, adding approximately 12% to its share price following the breakout success of its AI agent application, Muse. The market is repricing companies that build AI infrastructure, viewing their revenue potential as a primary driver of value. This sentiment was reinforced by falling energy costs, with U.S. crude oil dropping 4.5% and Brent crude falling 3.4%, which helped lower the 10-year Treasury yield to 4.95%.

Rate hikes and yield shifts

The Federal Reserve’s decision to raise rates to 3.75%-4.00% marks a shift from the previous easing cycle. Projections released alongside the decision indicate the policy rate will peak at 4.00%-4.25% by year-end before holding steady through 2027. This terminal rate is significantly lower than the 5.5% ceiling reached in the prior tightening cycle, which is critical for long-duration equities that are sensitive to where rates ultimately settle.

The decline in the 10-year Treasury yield to 4.95% follows the drop in crude oil prices, which eases the immediate inflation outlook. A lower long-term yield reduces the discount rate applied to future cash flows, providing a direct benefit to growth stocks. This dynamic supports the valuation expansion seen in the Nasdaq, as investors treat the current rate environment as a plateau rather than a continued upward spiral.

Global central bank tightening pace

The U.S. rate hike is part of a broader global trend, with the Bank of Japan raising rates to a 31-year high of 1.25% last week. The European Central Bank has hiked twice in 2026, and the Reserve Bank of Australia has raised rates three times this year to reach 4.35%. Markets are interpreting these moves as calibrated adjustments rather than an emergency response, distinguishing this cycle from the rapid tightening following Russia's invasion of Ukraine.

Summit impacts on trade outlook

Market attention is now shifting to the scheduled Trump-Xi summit at the White House, where Boeing orders, rare earths, and AI regulation are key agenda items. The primary focus is on the extension of the U.S.-China tariff truce, which is currently set to expire on November 10. An extension would remove a significant binary risk for U.S. multinationals and could trigger a broader equity advance ahead of the November midterm elections, as reported by Yahoo Finance.