Stocks higher on narrow tech and consumer rally

The S&P 500 rose 0.41% to 7,690.73 thanks to strong showings from Amazon and Tesla, But most large-cap issues were down for the day: The Invesco S&P 500 Equal Weight ETF RSP, fell 0.3%.

Invesco QQQ Trust, Series 1 QQQ rose 1.2%. That recovered less than half of Friday's 2.5% drop. QQQ is still down 3.7% over the last five sessions.

Meanwhile, The 10-year Treasury yield rose to 5.14%, and the State Street Utilities Select Sector SPDR ETF (XLU) lost 2%, the worst of the 11 sector funds on the day.

Amazon rose 5.0% after Morgan Stanley analyst Brian Nowak named it a top pick and raised his price target to $350 from $335, Yahoo Finance reported. Tesla rose 3.8%. Those two did nearly all of the lifting in State Street Consumer Discretionary Select Sector SPDR ETF XLY, which rose 1.8%.

VanEck Semiconductor ETF SMH rose 1.6%, but is still down 7.2% over five sessions. State Street Technology Select Sector SPDR ETF XLK rose 1.3%.

Utilities and homebuilders fell with long Treasuries

State Street Utilities Select Sector SPDR ETF XLU fell 2.0%, the weakest of State Street's 11 sector funds.

Treasury yields climb, pressuring utility stocks

Long-term Treasury prices fell as yields rose. The 10-year yield climbed 5 basis points (hundredths of a percentage point) to 5.14%, and the 30-year rose to 5.48%, TipRanks reported. iShares 20+ Year Treasury Bond ETF TLT, which holds Treasuries maturing in more than 20 years, fell 0.7%.

TipRanks attributed the utilities selloff to those increasing yields: When Treasuries pay more, income-focused investors have less reason to own utility stocks.

The National Association of Home Builders said its October confidence index, the NAHB/Wells Fargo Housing Market Index, fell three points to 29, the lowest reading since June 2012, and well under the consensus estimate of 32.

The NAHB said 43% of builders cut prices in October, the highest share it has recorded for that figure since 2020.

"Mortgage rates have climbed well above 7% in recent weeks, and higher gas prices and inflation have further weakened buyer traffic across much of the country," NAHB Chairman Bill Owens said.

iShares U.S. Home Construction ETF ITB fell 1.7%.

AI bubble concerns

The question underlying last week's selloff is how the artificial-intelligence build-out gets paid for. Reuters reported Monday that last week's tech drop reflected concern over how that spending will be financed, and over whether higher interest rates will curb it.

On Oct. 15, Reuters reported that bonds of CoreWeave, a data-center company that borrows heavily to buy the chips it rents out, had fallen to distressed levels. The shares finished down 0.4%, today, and briefly touched their 52-week low.

Axel Rudolph, chief technical analyst at IG Group, told Reuters that day that the selling looked more like a question about funding than a collapse in appetite for AI computing.

Federal Reserve Chair Kevin Warsh spoke about that same spending last week, at International Monetary Fund meetings in Bangkok. Reuters reported that he called artificial-intelligence investment a shock to prices and demand, even as he sees the wealth and productivity gains "over the horizon."

"If you're a central banker and you're in the business of trying to ensure stable prices and full employment, you've got to recognize this as a shock," Warsh said.

Reuters reported that the industry is expected to invest about $1 trillion next year, roughly 3% of gross domestic product. September consumer prices were already up 3.7% from a year earlier, the Bureau of Labor Statistics said on Oct. 14, and 2.6% excluding food and energy. The Federal Reserve meets Oct. 27-28.

Sam Stovall, chief investment strategist at CFRA Research, pointed to higher interest rates and to CoreWeave's problems. He told Reuters those were "sending shockwaves through the market."

"I don't think that is over just yet," Stovall said.