Week of Sep. 21: Yields Hit 2007 Highs, Stocks Shrug
The 10-year Treasury yield rose this week to its highest level since 2007. U.S. stocks finished higher anyway.
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Week of Sep. 21: Yields Hit 2007 Highs, Stocks Shrug
U.S. stocks rose in a week when the bond market moved against them. The S&P 500 and the Nasdaq Composite both gained, the Dow Jones Industrial Average ended a three-week losing streak, and the 10-year Treasury yield still climbed to its highest level since 2007. The tape's answer was to buy the companies that can grow through higher rates and leave the rest. 12
Where the week landed
| Index | Friday close | Week |
|---|---|---|
| S&P 500 | 7,743.41 (+0.51%) | +1.2% 2 |
| Nasdaq Composite | 27,068.72 (+0.48%) | +2.0% 2 |
| Dow Jones Industrial Average | 51,828.62 (+478.64 points, +0.93%) | +0.3% 1 |
The Nasdaq's week included a record close on Tuesday, its first since June, lifted by Micron Technology and other AI-linked shares. 3
Rates and oil moved in opposite directions. The 10-year Treasury yield touched 5.23% during Friday's session — its highest since June 2007 — and closed the week near 5.2%; the 30-year reached its highest level since 2004. 12 West Texas Intermediate settled at $92.41 a barrel and Brent at $104.32, after reports that U.S. and Iranian negotiators were exploring a phased deal that would reopen the Strait of Hormuz in exchange for lifting the naval blockade. 14
Tech led, and little else did
Information technology rose 3.1% for the week, the best of the 11 S&P 500 sectors. Meta Platforms accounted for much of that with a gain of about 13% on enthusiasm for Muse, the AI agent it unveiled at Meta Connect; the company is now valued near $2 trillion. 125
Microsoft rallied 3.7% on Friday after it added a coding tool and an always-on agent to its Copilot app, and it has gained 7% this year. Qualcomm rose 4% and Dell 5% the same day. 26
Akamai Technologies added about a fifth on Thursday after signing an $11.6 billion, seven-year cloud services agreement with Anthropic, including a warrant that could give Anthropic up to 5% of the company. Oracle fell 3.5% after it sent a force majeure notice tied to a New Mexico data center project. 47
The strength was narrow. Eight of the 11 S&P 500 sectors are lower so far in September, with financials and utilities down about 5%, and an equal-weight version of the index — the average stock — is down about 4% this month while the S&P 500 itself is little changed. The index traded this week at just under 19 times expected earnings, its lowest valuation since 2023. 28
Why yields moved
The week's catalyst was Wednesday's flash business survey. S&P Global's U.S. Composite PMI Output Index rose to 58.4 in September, the highest since July 2021, from 56.0 in August, with new orders at their strongest since March 2022 and the prices businesses pay at their highest since October 2022. 9
S&P Global said the reading was consistent with the economy growing at about a 5% annualized rate, and cited supply-chain delays as widespread as any since the pandemic. 9
Most of the increase in long-term yields has come from real yields rather than inflation expectations, which have stayed in a narrow range. The market moved to price roughly 3.9 quarter-point increases by October 2027, nearly one more than a week earlier, and a peak rate near 4.85% — well above the Fed's own projected median. 10
Federal Reserve officials pushed the same way. Governor Michael Barr's hawkish comments on Wednesday coincided with the 10-year yield's fastest one-day rise since April 2025, and New York Fed President John Williams said Thursday it was reasonable to think another increase might be needed this year. 111 Fed funds futures ended the week near a 66% chance of a hike at the October 27–28 meeting, up from roughly half earlier in the week. 212
The week's data
Durable goods orders were unchanged in August, against forecasts for a 0.3% decline, and orders for core capital goods — the equipment businesses buy — rose sharply on AI-related spending. On a year-over-year basis, durable goods demand was up 7.7%. 113
The University of Michigan's final September consumer sentiment reading was 48.1, down 7% from August but slightly better than the 47.8 mid-month figure. Year-ahead inflation expectations rose to 4.6%, the highest since June, and the expectations component fell 10.1%. 1
New home sales rose 6.4% in August to a seasonally adjusted annual rate of 684,000, with a median sales price of $393,700. The average 30-year fixed mortgage rate reached 7.45%, its highest since April 2024. 114
President Xi Jinping's state visit to Washington ended without major economic breakthroughs. The two sides agreed to extend their trade truce by two months, and the U.S. trade representative said more details of the negotiations would be released Monday. 1
What to watch next week
August's personal consumption expenditures price index arrives Wednesday with personal income and spending. Core PCE rose 3.3% over the 12 months through July, well above the Fed's 2% target, and the consensus looks for a 0.1% monthly increase. 810
The September employment report lands Friday, October 2. Economists surveyed by Reuters expect about 100,000 new jobs with unemployment at 4.2%; other forecasts are lower on both counts. A hot number would firm the case for an October hike. 81015
The rest of the calendar is busy. Micron Technology reports quarterly results Wednesday; the third quarter ends Wednesday, September 30, bringing a slug of Treasury settlements; and ISM Manufacturing, jobless claims and factory orders fill out the week. 1015
Fed speakers return as well: New York's Williams on Tuesday, Richmond's Barkin on Wednesday and Dallas's Logan on Friday. 10
The frame to carry in is the split this week exposed. The indexes are near record highs on a handful of AI names while the average stock has been falling, and yields are at their highest since 2007 while traders bet the Fed is not finished. Whether next week's inflation and jobs numbers are read as evidence of growth or as the cost of it decides which of those two halves gives way first.
References
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- 12Meeting calendars and information
federalreserve.gov
- 13US core capital goods orders surge in August
reuters.com
- 14New Residential Sales press release
census.gov
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