Weekly Market Update: Long-Term Yields Climb as Tech Leads
Markets were mixed this week as gains in large-cap technology stocks offset broader market weakness, while long-term Treasury yields rose sharply.
The S&P 500 gained 0.9% and the Nasdaq rose 3.5%, while the Russell 2000 small-cap index fell -1.3%. Growth 2.5% outperformed Value -0.7%, and the Equal-Weight S&P 500 declined -1.0%, signaling narrow leadership.
Technology led all sectors with a 3.6% return, while Utilities -4.4%, Energy -2.3%, Financials -2.1%, and Real Estate -1.8% lagged the market.
Bonds declined as Treasury yields rose across the yield curve, with long-maturity Treasuries falling -2.8% and investment-grade bonds declining -1.9%. The U.S. dollar strengthened 1.0% as rates rose, oil declined -2.0% despite intra-week volatility, and Bitcoin gained 10%.
Key Takeaways
Consumer Sentiment Nears Its Record Low
The preliminary University of Michigan Consumer Sentiment Index fell to 47.8 from 51.7, moving back toward the record low set in May. Consumers grew notably less optimistic about their personal finances and future business conditions, and one-year inflation expectations rose to 4.6% as higher fuel prices and trade-related concerns added to worries about household costs.
The weaker sentiment contrasts with recent data showing that consumers continue to spend despite a more cautious mood.
Why it matters: Consumers remain active, but they’re increasingly concerned about inflation, borrowing costs, and the outlook for their finances and the broader economy.
Long-Term Yields Keep Climbing
The 10-year Treasury yield approached 5.15%, its highest level since 2007, while the 30-year climbed above 5.40%, its highest since 2004. Several factors contributed to the continued rise, including stronger economic data, persistent inflation pressure, higher oil prices, and heavy Treasury issuance.
Why it matters: The move is notable not just because yields are high, but because of how fast they’ve risen. The faster rates move, the more quickly markets have to adjust expectations for economic growth, inflation, and borrowing costs, which can increase volatility.
Business Activity Picks Up, Price Pressures Persist
The preliminary S&P Global U.S. Composite Purchasing Managers Index rose to 58.4 in September from 56.0 in August, well above expectations and its strongest reading since 2021. Businesses reported the fastest hiring in more than four years, while input costs rose at their quickest pace in four years. The index is based on a survey of businesses rather than hard economic data, but it provides an early read on how activity is changing.
Why it matters: The survey suggests economic activity remains solid. The combination of firm activity and persistent price pressures is contributing to higher Treasury yields and reinforcing expectations that the Fed may need to keep rates elevated or tighten further.
Meta’s Muse Lifts AI, Weighs on Consumer Businesses
Muse, Meta’s new personal AI agent, surpassed ChatGPT to become the top free app in the U.S. Meta shares rose sharply, the Nasdaq set a new all-time high, and semiconductor stocks rallied as investors considered how AI agents could increase demand for computing power.
The launch also pressured travel, financial, insurance, and other consumer-facing stocks, as investors questioned whether AI agents could make it easier for customers to compare prices, negotiate bills, and switch providers.
Why it matters: Strong early adoption reinforces the case for continued demand for AI infrastructure, but the reaction across travel, financials, and other industries shows that investors are still determining who ultimately benefits and who faces disruption.
