When rates are below 6%, stocks rise

The S&P 500 fell 0.02%, and the Nasdaq dropped 0.15%. The Dow Jones fell 0.35%, and the Russell 2000 small-cap index fell 0.43%.

Semiconductors are climbing back from their earlier steep declines.

Resource stocks rose and are now falling. Banks and healthcare are also showing weak earnings.

The 10-year yield rose 0.52%.

The 30-year yield climbed 0.62% to reach 5.56%. The 2-year yield fell from 5.3% to 5.2%.

The rally itself is not the problem, but it is currently led by a narrow group. Only the winning stocks keep climbing, and an extreme gap has opened between the cap-weighted and equal-weighted averages. AI companies are earning outsized profits while the rest of the stocks cannot keep up, which is a realistic burden. Nobody anticipated this market structure.

The situation in which only the winners keep rising has become the biggest talking point on Wall Street.

There is a view that the cautious rebound in most stocks last week will rescue investors who did not invest in large caps.

Stock value declines come well before the deterioration in earnings. Investors expect future profitability to worsen and mark down prices first.

This is a historically very low figure.

A handful of giant tech stocks are driving the index higher, while most stocks increasingly lag behind.

A survey found that 37% of investors would favor bonds if the 10-year yield reached 6%.

In the 5.5% to 6% range, stock gains become harder and money is likely to move into bonds. Below 6%, stocks look relatively attractive, but above 6%, bonds become more appealing and stock investment declines. Rising rates are currently increasing the appeal of bonds over stocks.

Higher borrowing costs could hurt the housing market, corporate investment, and consumer demand. Market anxiety is growing ahead of the September consumer price index release.

The market expects the Fed to deliver an additional 160 basis points of rate hikes over the next 12 months.

Large asset managers such as BlackRock consider this expectation somewhat excessive. This reveals a gap between market expectations and expert assessment.

The market continues to favor AI and technology.

Meanwhile, policy uncertainty is causing short-term volatility. As tech preference and policy uncertainty pull in opposite directions, market volatility is rising.

Elon Musk is building a fourth major U.S. wireless carrier, which is expected to expand into global markets.

Last week, SpaceX received FCC approval that includes regulatory exemptions for a terrestrial mobile network.

It also secured approval to deploy 15,000 units for direct device connection. Once the satellite network is fully built, a fourth phone network is expected to emerge in the U.S.

Bank of America kept its view on telecom stocks and assessed that the recent sell-off created a buying opportunity.

It raised its T-Mobile price target to $170, well above the current price of $153. The advantages of incumbents' spectrum and terrestrial networks were emphasized.

JPMorgan and Wells Fargo posted weak third-quarter results.

Citigroup's net income beat expectations, but revenue barely topped estimates. Goldman Sachs and UnitedHealth both delivered strong gains in revenue and net income, and UnitedHealth also raised its full-year profit outlook.

Both sectors have set high earnings expectations. Semiconductor makers and energy companies are expected to grow earnings 30% and 122% year over year, respectively, so if they fail to meet these, pressure on share prices could build.

Among 16 analysts covering Galaxy Digital, 3 rate it Strong Buy, 11 Buy, and 2 Hold, with an average target price of $40.

New business segments are being undervalued. Even though revenue, deposits, product types, and profit all rose from the previous quarter in Q2 2016, the market is ignoring this.