Stocks neared or hit record highs last week, even as the
10-year Treasury yield reached its highest level since 2002. Behind that move,
stubborn inflation is keeping pressure on the Federal Reserve to hike rates
again, while energy costs continue to squeeze households.
Here•s how the major benchmarks finished the week, followed
by a closer look at the forces moving markets.
Stock Index Performance
Currents at Work
Bond yields hit a multidecade high. The 10-year
Treasury yield, a benchmark for mortgages and many other loans, reached that
peak midweek before easing slightly. Inflation and government-debt concerns
helped drive the climb. For investors, new bonds now pay more, but existing
bonds can lose value if rates keep rising. Higher yields also make stocks look
pricier by comparison.
The economy grows, but slows. The service
sector, which includes everything from restaurants to healthcare, kept
expanding in September, though at a slower pace than it had been. Businesses
said costs are rising quickly, driven by fuel, tariffs, and supply snags. Hiring
has slowed sharply, but layoffs remain rare, a pattern economists call
•low-hire, low-fire.•
Energy costs continue to pinch households. Oil prices
remain high amid uncertainty over the war with Iran, keeping gasoline above $4
a gallon on average and straining family budgets. Consumer
sentiment soured in early October amid frustration over living costs,
especially among lower-income households. So far, though, this gloomier mood
hasn•t translated into a sharp drop in spending.
The Week Ahead
A busy calendar will test the market•s optimism. Major
banks begin reporting earnings Tuesday, offering an early read on how
households and businesses are coping with higher borrowing costs. Wednesday•s
consumer price index (CPI) report will indicate whether high energy costs are
spreading into everyday prices, and Thursday•s retail sales figures will reveal
whether shoppers are still spending. This week•s inflation and spending data
could help shape the Fed•s next move. Additionally, two key AI suppliers, ASML
and Taiwan Semiconductor, report this week, giving a fresh check on whether
demand can sustain the tech rally.
