Wall Street Lunch: Treasury Yields Hit Financial Crisis-Era Highs

Listen below or on the go on Apple Podcasts and Spotify

PPI and ECB hike boosts longer yields. (0:14) Anthropic maps how AI could reshape the economy. (1:32) Meta gets an upgrade as JPMorgan sees new AI revenue. (2:58)

This is an abridged transcript of the podcast:

Our top story so far, treasury yields are on the march higher, hitting levels not seen since the Financial Crisis.

Driven by global rate increases and wholesale energy inflation, the 10-year yield (US10Y) hit 4.93%, its highest level since 2008. The 30-year (US30Y) rose to 5.35%, also a new post-2007 high.

This morning, the European Central Bank raised its key deposit rate by 25 basis points to 2.5% amid commodity pressures.

Shortly after, the August Producer Price Index showed annual wholesale inflation rising to 5.4%, with the core PPI moving up to 4.6%.

David Russell, head of market strategy at TradeStation, said diesel prices are “the biggest concern because it’s an input cost for so many goods and services” and the rise in prices threatens to drive up non-core inflation in the coming months.

Pantheon Macro’s Samuel Tombs said simply that there’s no disinflation in this report.

As Treasury yields climbed, so did expectations for a Federal Reserve rate hike next week. Odds of a quarter-point hike rose to 70%, the highest level in more than a month.

Diane Swonk, chief economist at KPMG, says regardless of what the CPI shows Friday, “the components that feed into services inflation in the PCE measure of inflation were hot and persistent.”

“That is yet another reason that the Fed will need to raise rates,” she said. “The bond market is already in disarray and would be much harder on the economy if the Fed fails to act.”

Also, on the economic front, Anthropic’s economics team has released an interactive model estimating how artificial intelligence could reshape the U.S. economy by 2030.

In the Modest case, AI’s economic footprint resembles the internet’s: GDP ends up just 1.6% above a no-AI baseline, and unemployment stays within normal historical ranges.

The Substantial scenario assumes AI autonomously handles about half of all knowledge work by 2030, pushing GDP 8.3% above baseline to $36T (versus roughly $31T today), while total unemployment settles around 4.6%.

The Extreme scenario is that AI becomes more productive than humans across nearly all knowledge-work tasks and recursive self-improvement drives rapid adoption, annual GDP growth could hit 15%, doubling the economy roughly every 4.5 years and lifting GDP 32% above baseline to $44.4T.

But the gains would be lopsided: knowledge-worker unemployment would climb well past typical recessionary levels, those workers’ wages could fall more than 10%, and capital’s share of GDP would jump nearly 15 points to 55%.

Among active stocks, Macy’s (M) is showing signs of a turnaround, with Q2 growth across all three nameplates and improved profitability.

CEO Tony Spring said the company remains “focused on scaling what is resonating most with customers – exciting brands and assortments and compelling events and experiences.”

JPMorgan upgraded Meta Platforms (META) to Overweight from Neutral and raised its price target to $820 from $640, saying the company is entering the early stages of monetizing AI beyond its core advertising business.

Analyst Margaret Hoffman said Meta’s Muse Spark 1.3 model is competitive with leading AI models and that the upcoming Watermelon model could unlock opportunities across consumer products, business intelligence, advertising and internal operations.

And CooperCompanies (COO), known for its contact lenses, is the biggest S&P decliner after cutting guidance for full-year revenue and earnings.

And in other news of note, Mr. Pibb has broken out to become the fastest-growing brand in 2026. Overall purchase consideration jumped more than 11 percentage points.

The revived Mr. Pibb, owned by Coca-Cola (KO), features 30% more caffeine and a spicy cherry taste with hints of caramel. A Mr. Pibb Zero Sugar version was also part of the brand refresh.

Popularity has surged across baby boomers, Generation X and millennials.

Mr. Pibb began in 1972 as Coke’s pepper-style soft-drink competitor to Dr Pepper (KDP). Coca-Cola first used the name Peppo in a limited Memphis launch, but legal pressure from Dr Pepper led the company to revise the product and introduce Mr. Pibb in test markets.