Week of Oct. 5: Yields Hit 24-Year Highs, Stocks Hold On
The 10-year Treasury yield touched 5.35 percent this week, its highest level in 24 years. U.S. stocks still finished higher.
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Week of Oct. 5: Yields Hit 24-Year Highs, Stocks Hold On
U.S. equities finished a week of records and reversals higher. The S&P 500 and the Nasdaq Composite both closed at all-time highs on Tuesday, the 10-year Treasury yield reached a 24-year high on Wednesday, the AI trade stumbled on Thursday, and Friday's rebound in software and health care still left all three major averages up on the week. 12
Where the week landed
| Index | Friday close | Week |
|---|---|---|
| S&P 500 | 7,811.54 (+0.59%) | about +1.2% 1 |
| Nasdaq Composite | 27,366.17 (+0.64%) | +0.6% 1 |
| Dow Jones Industrial Average | 51,654.95 (+423.31 points, +0.83%) | +0.9% 1 |
The records came in the middle of the week. Tuesday's close was an all-time high for the S&P 500 at 7,820.47 and for the Nasdaq Composite at 27,604.74, as crude prices steadied and Treasury yields eased. 3
Rates were the story underneath. The 10-year Treasury yield reached 5.35 percent on Wednesday, its highest level since 2002, before closing the week at 5.242 percent — slightly below where it started. The 30-year touched 5.666 percent and closed at 5.60 percent. 456
Oil finished the week higher. Front-month West Texas Intermediate settled near $92 a barrel and Brent above $104, after President Trump said the United States will not attack Iran before next month's midterm elections and said Russia had agreed to supply diesel to world markets. 12
The AI trade wobbled, and the tape held
The week's gain was broad, and the AI trade was its drag. Consumer staples and utilities led the S&P 500's sectors, a defensive pairing for a market whose records have rested on technology, and the broad advance offset declines in tech and AI-linked shares. 17 Technology still set the market's highs and then gave some back: the Nasdaq Composite closed at a record on Tuesday, then fell for two sessions, with the sharpest drop on Thursday — more than 1 percent, its biggest one-day loss since mid-August. 1
The trigger was a revenue figure. OpenAI told investors it was running at about $50 billion of annualized revenue at the end of September; a $68 billion figure had been widely reported a month earlier. 1
Friday brought the rebound. Software led it: Palo Alto Networks rose 5 percent, CrowdStrike 4 percent and Palantir Technologies 5 percent. Microsoft added 2 percent, and Amazon 3 percent. 1
Health care was the other strong corner. Merck and Gilead Sciences each gained more than 2 percent, and Moderna and Novavax jumped after the National Institutes of Health outlined a plan to speed development of personalized cancer vaccines. 1
One deal repriced an entire sector. SpaceX agreed to buy a nationwide spectrum portfolio, and the wireless carriers fell hard: AT&T, T-Mobile US and Verizon each dropped between 8.8 percent and 13.3 percent, with Verizon's slide its worst day since 2002. 12 The tower companies gained instead — American Tower up 6 percent and Crown Castle almost 8 percent. 1
Delta Air Lines reported its first earnings miss in two years: adjusted earnings of $1.72 a share against $1.75 expected, revenue of $17.59 billion against $17.67 billion, and a 2026 profit forecast cut to $5.10–$5.60 a share from $6.50–$7.50, which the airline blamed on fuel. The stock fell about 4 percent. 1 Communication services was the only one of the 11 S&P 500 sectors lower on Friday. 2
Why the Fed still leans toward a hike
The bond market is doing part of the Fed's work already, and the Fed still thinks it has more to do. The Treasury sold three-, ten- and thirty-year debt across the week and demand held. Wednesday's $39 billion 10-year sale drew 80.3 percent of its bids from indirect buyers, which include foreign central banks, against a ten-auction average of 72.4 percent — and still cleared at 5.30 percent, the highest auction yield since 2000. 4 Thursday's $22 billion 30-year bond sale drew 72.3 percent from indirect bidders and cleared at 5.618 percent. 8
The Fed's own record reads more hawkish than the market. Minutes of the September meeting, released Wednesday, showed most participants assessed that "another increase in the target range for the federal funds rate would likely be appropriate by year end", with no indication of when. 4 Governor Christopher Waller said the same on Thursday, adding that "the hikes do not need to come at consecutive meetings". 8
Traders read it as patience. The market-implied odds of a quarter-point increase at this month's meeting fell to about 19 percent, from 29 percent a week earlier. The 2026 year-end forward rate sits at 4.125 percent, and the market's expected peak — in October 2027 — is 4.655 percent, above the Fed's projected median peak of 4.125 percent. 9
The data keeps the argument alive. Monday's ISM services survey slowed to 54.9 in September from 55.4, while the prices companies pay rose to 74.0 — the highest since July 2022 and the sixth reading above 70 in seven months. 10 Initial claims for unemployment benefits held at 197,000 in the week ending October 3, down 2,000 from the week before. 11
Consumers are the other half of that story. The University of Michigan's preliminary October sentiment index fell to 46.3, its second-lowest reading on record, with one-year inflation expectations at 4.7 percent and five-year expectations at 3.5 percent. 1 The Federal Reserve's Survey of Consumer Finances found families more likely to be behind on their financial obligations than at any point since its 2010 survey. 1
What matters next week
Third-quarter earnings season begins in earnest on Tuesday, and the banks go first: JPMorgan Chase, Goldman Sachs, Citigroup, Wells Fargo, Bank of America and Morgan Stanley, alongside Johnson & Johnson and UnitedHealth. 12
The bar is high. Analysts expect S&P 500 earnings to grow 30.6 percent in aggregate from a year earlier for the July–September period, with energy up 123 percent and technology up 66.5 percent, according to LSEG data. 2
Wednesday brings September's consumer price index, where the consensus looks for a 0.6 percent monthly rise in headline prices, up from 0.4 percent in August, and a higher annual rate. 9 Producer prices and retail sales follow on Thursday, with existing home sales and the NFIB small business survey on Tuesday and industrial production on Friday. 9
The Fed's Beige Book lands Wednesday. Cleveland Fed President Beth Hammack speaks Monday, Boston's Susan Collins on Tuesday and Chair Kevin Warsh at the IMF meetings on Thursday. 9
The frame to carry in is the one the week exposed. The long bond is at 24-year highs and does not need the Fed's permission to tighten, household debt is deteriorating, and the AI trade that drove those records wobbled this week. 19 Next week's inflation number and the banks' results decide whether the earnings beneath those prices hold up.
References
- 1
- 2Wall Street posts weekly gains with earnings, inflation data on tap
finance.yahoo.com
- 3S&P 500, Nasdaq reach record closing highs as focus pivots to earnings
virginiabusiness.com
- 4
- 5U.S. 10 Year Treasury
cnbc.com
- 6U.S. 30 Year Treasury
cnbc.com
- 7S&P 500 Posts Weekly Gain, Led by Consumer Staples, Utilities
marketscreener.com
- 8
- 9
- 10
- 11Initial Claims (ICSA), U.S. Employment and Training Administration
fred.stlouisfed.org
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