The 10-year Treasury closed Friday at 5.18% by the Journal’s measure, its highest close in 19 years, and the stock market’s answer was to go up. The Dow rose 479 points, or 0.9%, to 51829, ending a three-session slide; the S&P 500 and the Nasdaq each added 0.5%, and all three finished the week higher despite a selloff in the middle of it, the Journal reports. For the week the Dow gained 0.28%, the S&P 500 1.21% and the Nasdaq 2.06%, while the Russell 2000 lost 0.80%. That isn’t a market panicking about bond math.
The bond rout paused rather than reversed. By the Journal’s figures, the 10-year came off a high of 5.228% Friday to end at 5.18% — still above Thursday’s 5.163%, so it rose on the day. The 30-year, which had crossed 5.5% for the first time in 22 years, finished right at that mark, and the 2-year slipped to 4.862%. Oil eased too: the paper has Brent down 2.1% at $104.32 after unconfirmed reports of U.S.–Iranian talks on reopening the Strait of Hormuz. Mona Mahajan of Edward Jones told the paper that strong earnings and a solid economy have held stocks up, though yields that stay elevated for long could weigh on both stocks and growth. Thus far, she said, “the growth story is challenged, but not derailed in any way.”
What the futures are pricing
Under the calm, the inflation story hardened. Michigan’s consumer sentiment weakened in September, though less than the preliminary estimate, and inflation expectations — including the long-term kind — rose. Fed officials spent the week calling inflation the priority, with several signaling more hikes unless the data improve. Fed-funds futures price three more quarter-point increases by the end of 2027, and CME FedWatch puts the odds of one in October above 66% — a crowd price, not a forecast. Joseph Purtell of Neuberger Berman warned that a 10-year near 5.2% is edging into territory that presses on risk assets. The breadth numbers didn’t argue with him: 13 new highs against 317 new lows on the NYSE.
Our read
This is the week’s market of record, so here’s the desk’s scorecard against it. The falsifier stands: a record S&P 500 close above 7,798.99 before Oct. 2 would prove our fall caution wrong, and Friday’s 7,743.41 is 0.71% short with a week left — Micron reports Sept. 30 and the jobs report lands Oct. 2, with the Fall Drop Meter at 6.3 of 10. The September letter’s three conditions for new money still pass one of three: vol-of-vol under 90 passes at 87.84; core inflation at 0.3% fails the 0.1% test; and a Fed that raised to 3.75–4% on Sept. 16 fails the not-raising test. At 9:48 p.m. PT Sunday the prediction markets were pricing about 64.5% on a quarter-point October increase. Through Friday nothing new was bought, six sessions running; the one addition since is Valero, at 1.5% in ten energy and tactical books.
For everyone else, the useful number this week isn’t the Dow’s 479 points; it’s two lines in the Journal’s weekly table. Long Treasurys (iShares 20+ year) lost 2.38% on the week; 1–3 year Treasurys lost 0.04%. That’s the case for keeping safe money short (IN02), in miniature: in the Journal’s table the 13-week bill auctioned at 4.015%, a 52-week high, and paid you to sit out a week that took 2.38% off the long end. Weeks like this are for checking that the money you’ll need in the next three years isn’t riding the long end by accident — fifteen minutes, bring your statement.