Nvidia and megacaps outperform as rising U.S. Treasury yields lift bond volatility

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Nvidia, megacaps outperform on yield shift

Highlights

The U.S. 10-year Treasury yield rose about 0.5 percentage point this month, briefly topping 5.3% during Wednesday, pressuring equities and boosting bond volatility.
Only about 25% of S&P 500 components trade above their 50-day average as technology led gains and megacaps like Nvidia, Microsoft, and Apple maintain index strength.
Weiss Ratings assigned buy ratings to Nvidia (B+), Apple and Alphabet (B), and Microsoft (B-), while major ETFs and the broader market received hold ratings due to diverging stock performance.

Yield pressure reshapes market leadership

As reported by Weiss Ratings, the latest market move is being driven less by broad equity selling than by the jump in Treasury yields, with the 10-year note rising about half a percentage point this month and moving above 5.3% during Wednesday's session.

That matters for portfolio positioning because higher bond yields can draw investors away from riskier equities when fixed-income returns look more competitive. Weiss said the S&P 500 now offers roughly the same earnings yield as the interest paid by a Treasury, while the equal-weight version of the index, a proxy for the average stock, was heading into a seventh straight losing week at the end of September.

The Federal Reserve raised interest rates on Sept. 16, and minutes released Wednesday indicate that most officials still expect another increase by year-end. Bond traders largely looked through the minutes, with the 10-year yield ending Wednesday only slightly higher after a brief dip tied to a well-received afternoon auction.

Weiss also pointed to the bond market's MOVE index, which tracks expected swings in Treasury prices, saying it has risen 38% in a month. By contrast, the S&P 500 has avoided a daily drop of 1% or more since the Fed meeting, even as oil has posted frequent sharp moves and investor sentiment remains evenly split between bulls and bears in the latest American Association of Individual Investors survey for the week ending Oct. 7.

Stock selection diverges from index performance

Market concentration is amplifying the gap between headline index performance and the experience of many investors. Only about a quarter of S&P 500 constituents are trading above their 50-day moving average, according to the analysis, and technology is the only sector posting gains this month.

A handful of large companies, including Nvidia, Microsoft and Apple, are supporting the benchmark. Weiss assigned the S&P 500 SPDR, the Invesco S&P 500 Equal Weight ETF and the Invesco QQQ Trust ratings of C+, or hold, while the iShares Russell 2000 ETF was rated C, also a hold.

Several of the biggest index supports received higher marks than the funds themselves, with Nvidia rated B+, Apple and Alphabet rated B, and Microsoft rated B-, all classified as buys. Weiss argued that the widening gap between concentrated winners and weaker broader market performance is where stock-picking opportunities are emerging.

The note also said recent losses in recommended names such as Eaton and GE Vernova do not change their underlying order trends or buy ratings. Weiss added that historical tests since early 2025 show the iShares MSCI USA Quality Factor ETF, rated C+, lagged the S&P 500 each of the three times the 10-year yield climbed at least 0.4 percentage point within a month, challenging the view that investors should automatically rotate into defensive quality strategies when yields surge.

Our earlier article on surging Treasury yields and the bond selloff outlined why many wealth managers view higher rates as a rare chance to lock in more attractive fixed-income returns. We also noted renewed interest in high-grade municipal bonds for their potential tax advantages, alongside a focus on credit quality and careful duration management as yields stay elevated.

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