U.S. stocks have largely absorbed a sharp rise in Treasury and overseas government bond yields, with the 10-year Treasury yield crossing 5% while the S&P 500 remains less than 3% below its August 13 record high. Higher rates and geopolitical risks have increased market volatility, but Bank of America’s latest fund manager survey showed investors remained overweight global equities and optimistic about earnings. BlackRock, UBS and other investors said AI spending and demand could continue supporting growth despite near-term turbulence. Investors continue to point to AI-driven profit growth, strong corporate earnings and a resilient economy, although they are monitoring whether the market can remain calm. The 10-year Treasury yield last reached 5% in October 2023, when stocks experienced a mild one-day selloff. A more sustained move above 5% in 2007 preceded an almost 5% S&P 500 decline over two months and larger losses later. Expected second-quarter earnings growth for S&P 500 companies is 53% year on year, or 49.5% excluding energy, while profits are forecast to rise 35% in 2026 after growing 14% last year. Apple and Microsoft remain near record highs, and Alphabet and Amazon have reported strong cloud-computing growth linked to AI. U.S. job growth accelerated sharply in August, consumer spending remained robust and revised estimates showed spending growth of 3.4%, compared with an initial 3.2% estimate. The Russell 2000 has outperformed the S&P 500 this year, despite falling more than 5% from its mid-August record as yields rose. Analysts also say the post-pandemic inflation shock has made stocks and bonds more likely to move together, reducing bonds’ effectiveness as a hedge and supporting equity allocations. Discount rates remain a key risk for high-growth stocks, while adjusted earnings figures exclude mark-to-market gains at Alphabet and Amazon.