Morgan Stanley Sees AI-Driven Equity Momentum Continuing

Morgan Stanley strategist Michelle Weaver sees continued momentum in equities driven by artificial intelligence developments, according to a recent interview. She highlighted that strong demand for technology, particularly AI-related, remains a key support for the stock market. However, she noted that the 10-year Treasury yield, currently around 4.5%, is a critical threshold for equity valuations. Yields above this level could weigh on stocks, as higher discount rates reduce the present value of future earnings.

For oil and energy traders, the interplay between interest rates and equity sentiment matters because energy stocks are part of the broader market. When yields rise, growth stocks tend to underperform, but energy stocks may behave differently due to their value orientation and sensitivity to inflation. Weaver pointed out that some inflationary pressures, such as rising gasoline prices, are causing concern, but she views them as relatively narrow and partly linked to geopolitical factors like tensions in the Strait of Hormuz, which the president indicated could persist until September. These factors could support energy prices in the near term. For current pricing context, traders can check NowPrice's fuel page.

Looking ahead, the key data point to watch is the trajectory of the 10-year yield. If it breaks decisively above 4.5%, equity valuations could come under pressure, potentially spilling over into energy stocks. Additionally, any escalation in Strait of Hormuz tensions or changes in gasoline demand will be closely monitored. The market will also focus on upcoming inflation reports and Fed commentary for clues on the rate path.