S&P 500 is near a record, but this Wall Street warning just hit a 2007 high

The S&P 500 remains within striking distance of a record even as a key measure of US borrowing costs has climbed to levels last seen before the global financial crisis.

The index closed Monday at 7,745.06, down 0.52% for the session and roughly 0.7% below its August 13 record close of 7,798.99.

At the same time, the 30-year Treasury yield rose to 5.3103%, its highest since 2007, before reaching about 5.3146% in early Tuesday trading. The 10-year yield was near 4.73%.

Wall Street has so far absorbed increasingly expensive long-term money because corporate earnings remain strong. The question now is how long that cushion can offset a rising cost of capital.

A 2007 bond signal collides with record-level stocks

The 30-year yield’s move above 5.3% matters because Treasuries compete directly with equities for investor capital and influence borrowing costs across the economy.

Higher government yields can feed into mortgages, corporate debt and refinancing rates.

They also raise the discount rate used to value future corporate profits, making expensive growth stocks harder to justify if earnings momentum weakens.

Yet the S&P 500 remains less than 1% from its peak despite two consecutive declines.

“The major reason” stocks are holding up is that “earnings seem to be fine regardless of higher rates,” SimCorp’s Melissa Brown told MarketWatch. But she warned that this eventually changes as companies need to refinance.

The latest yield increase has also coincided with renewed energy pressure. Brent crude moved above $91 on Tuesday as fading hopes for a US-Iran settlement revived inflation concerns.

AI is adding to Wall Street’s demand for capital

Government borrowing is only part of the pressure building in bond markets.

Alphabet, Amazon and Meta have issued almost $220 billion of bonds so far in 2026, more than double their combined issuance for all of 2025, according to LSEG data.

The spending highlights an unusual feedback loop. AI investment is supporting stronger growth expectations and equity valuations, but building data centres, buying chips and securing power also requires enormous amounts of capital.

“There’s a competition for capital which is relatively unprecedented in recent times,” Vivek Paul, UK chief investment strategist at BlackRock Investment Institute, told Reuters.

Satori Insights founder Matt King expects real yields to keep rising until higher borrowing costs begin restraining the credit creation and risk-taking that helped drive them higher.

That creates a potential limit for the AI trade, as financing can become expensive enough to slow investment even when underlying demand remains strong.

Strong earnings are buying Wall Street time

For now, earnings remain the reason equities have resisted the bond-market warning.

The blockbuster corporate results and resilient economic activity have helped stocks absorb the rise in inflation-adjusted yields. That makes the reason behind higher rates crucial.

LPL Financial’s Jeff Buchbinder has argued that equities can cope with rising yields when they reflect stronger economic growth.

The relationship becomes more difficult when inflation, debt supply and fiscal concerns are doing the pushing.

The current mix is therefore less comfortable. Long-term yields are climbing alongside heavy government financing needs, unprecedented AI-related borrowing and renewed oil-price pressure, even as recent US economic data has softened.