What the Stock Market’s Record Rally Has to Do With Rescuing the Yen

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The U.S. Treasury Department’s official reason for intervening in the Japanese yen last week was to prop up a major currency that is critical to global trade and stabilize the finances of an important ally.

But the unusual move also served to calm anxious investors around the world, underscoring how myriad market risks are tightly connected. The intervention, according to analysts, was one of several forces fueling the recent rally in the S&P 500 index, which hit a fresh record on Tuesday.

“It’s one part of a big connected picture,” said Matt King, founder at Satori Insights, adding that it became necessary for the Treasury to intervene in the yen “but for weird reasons.”

“The decision and the manner of the intervention ultimately say as much about U.S. vulnerabilities as they do about Japan,” he said.

One of those vulnerabilities is related to the amount of money that is being spent by big tech companies betting on the future of artificial intelligence. These companies have pushed the stock market to repeated new highs and are now driving growth in the broader economy as well.

Over the past year, a handful of A.I. companies have issued a deluge of debt mostly in the form of bonds, as they have sought to raise money to build A.I. infrastructure. The need for hundreds of billions of dollars in financing has forced these companies to pay increasingly more in interest to bond investors, in part because a rise in the supply of bonds puts downward pressure on their prices, which move in the opposite direction to yields. Higher yields on corporate bonds raise borrowing costs for companies and have unnerved some stock investors mindful that those costs eat into future profits.

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