The Nasdaq 100 index rose by 3.3% in September, despite the opposite trend of most sectors in the U.S. stock market during the same period.

The Russell 2000 Index fell by 5.3%, and the Dow Jones Industrial Average dropped by 4.1%. Nine out of 11 major market sectors closed lower, with 78% of the components of the S&P 500 Index also experiencing declines that month. However, according to Nasdaq's September review, the strength of large-cap tech stocks and communication services stocks was sufficient to drive the Nasdaq 100 Index higher.

This differentiation highlights an increasingly important feature of the U.S. market: the indices that investors follow on a daily basis are being driven more and more by a smaller group of companies, rather than by the broader market as a whole.

AI and large-cap stocks are supporting the Nasdaq

The technology sector rose by 4.5% in September, and the communications services sector rose by 4.3%. These are the only two major sectors that achieved significant gains.

Due to the Nasdaq 100 index's high exposure to the largest technology and growth companies, the strength of stocks related to AI is sufficient to offset the weakness in other sectors.

The 5% yield on U.S. Treasury bonds has a greater impact on smaller companies.

The other aspect of this differentiation comes from the bond market.

The yield on 10-year U.S. Treasury bonds rose by 54 basis points to 5.29% in September, marking the largest single-month increase in four years. Nasdaq stated that persistent inflation, higher energy prices, tighter monetary policy, and the large-scale issuance of bonds by governments and corporations are all factors contributing to this increase in yields.

Higher interest rates often have a greater impact on smaller companies, as they are typically more reliant on external financing, and the borrowing terms are usually less favorable than those for larger companies.

This helps to explain why the Russell 2000 Index recorded its worst single-month performance since March 2025, while the large-cap growth stocks maintained their resilience.

Emir Abyazov

Editor-in-Chief Coinpaper, responsible for expanding data-driven editorial operations, content discovery oriented towards SEO, as well as prioritizing audience-oriented encryption, AI and fintech narratives.