The 10-year went from 4.96% to 5.22% in five sessions. The 30-year hit its highest level since 2004. Mortgage rates reached 7.37%. And all three major indices still finished the week higher. That tells you everything about what's driving this market.
The Close
Green close to cap the week. The Dow jumped 479 points. The S&P gained 0.5%. The Nasdaq added 0.5%. All three notched their first weekly wins in three weeks.
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| WTI Crude | $92.41 | −2.33% | ||
| 10-Yr Yield | 5.22% | +2 bps | ||
| Dow | 51,829 | +0.9% | ||
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| Technology |
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+1.1% | ||
| Industrials |
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+0.9% | ||
| Comm Services |
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+0.7% | ||
| Health Care |
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+0.6% | ||
| Financials |
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+0.5% | ||
| Consumer Disc |
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+0.4% | ||
| Utilities |
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+0.1% | ||
| Real Estate |
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−0.4% | ||
| Energy |
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−1.0% | ||
| Consumer Staples |
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−1.0% | ||
| Materials |
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−1.2% | ||
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Oil did the heavy lifting. WTI dropped 2.33% to settle at $92.41 after Iran asked the U.S. to return to the June memorandum of understanding that failed to end the conflict. Brent fell 2.14% to $104.32. The Hormuz story isn't done, but the market is starting to price in a resolution.
The 10-year kept climbing. It ticked up 2 basis points to 5.22%, its highest level since 2007 and a full 26 basis points above where it started the week. Seven of 11 S&P sectors finished green despite that, led by technology — up more than 1% — and industrials at 0.85%.
The losers told the rate story. Materials fell 1.2%. Consumer staples dropped 1%. Real estate lost 0.4%. When yields climb, the sectors that borrow the most or compete with bond income for investor dollars take the hardest hit.
The biggest single-stock story was Akamai, up 3.2% after announcing an $11.6 billion, seven-year cloud infrastructure deal with Anthropic, the company behind the Claude AI chatbot. The deal could expand to $20 billion. The stock opened up 21% on the news but pared most of the gain as investors weighed the $5.5 billion in upfront capital spending.
Zscaler crashed 10.1% after its chief revenue officer stepped down — the worst single-stock loss of the day. Twilio fell 6.2% after HSBC downgraded the stock. Fastly dropped 6% after Citi questioned whether the company's AI traffic would translate into real revenue under its billing model. Mosaic slipped 4.1% on headwinds in the fertilizer sector.
Nike dipped 0.7% to $35.75 after Bank of America downgraded it to Underperform and slashed its target to $30. The stock opened down 2% but recovered through the afternoon. The turnaround story has been pushed out to fiscal 2028.
Consumer sentiment came in at 48.1 for September's final reading — slightly better than the 47.8 preliminary but still the lowest in four months. The number inside the number: one-year inflation expectations hit 4.6%, the highest since June. Consumers are feeling the squeeze from $4.50 gas even as Wall Street celebrates weekly gains.
Meta closed the week up 16.8% and is approaching a $2 trillion market cap, all on the back of MUSE. Costco reported earnings of $6.75 per share on revenue of $95.72 billion, a beat, though shares slipped on cautious forward guidance.
What The Market Is Pricing In
The S&P 500 gained about 1.2% this week. The Nasdaq gained about 2.1%. The Dow added 0.3%. Those are solid weekly numbers in any environment. In a week where the 10-year yield climbed 26 basis points to 5.22%, they're remarkable.
Start with what should have happened. Yields at 19-year highs, a PMI that killed the one-and-done thesis, mortgages at 7.37%, and oil still above $90 — that's a recipe for a down week. The models say stocks should fall when the risk-free rate jumps this fast. They didn't.
Why? Two forces offset the bond selloff. The first was diplomacy — a trade truce, Iran deal speculation, and falling oil on Friday gave the market a floor every time yields tried to push it lower. The second was AI.
The AI trade carried this market through the worst bond week in over a year. Meta gained 16.8% on MUSE. Akamai locked in an $11.6 billion deal with Anthropic. Chips rallied for most of the week. Technology and communication services led the S&P while rate-sensitive sectors like materials and consumer staples lagged. The market is telling you that AI spending is durable enough to offset 5%+ yields — at least for now.
There's a name for what's happening. When one sector's growth is strong enough to pull the whole index higher even as the macro environment deteriorates, traders call it a leadership market — the index goes up, but fewer and fewer stocks are doing the lifting. It works until it doesn't.
Here's the read going into next week. If AI earnings hold up — Micron reports Wednesday — the market can absorb 5%+ yields. If the Iran deal gets done and oil breaks below $90, yields ease and stocks run. But if the AI buildout shows any cracks, the market loses the one thing keeping it afloat. And at 5.22% on the 10-year, there's no safety net.
The last time a growth trade ran this hot while yields were climbing was 1998 into 1999. Tech kept rallying for another year before the music stopped in March 2000. The parallel isn't a prediction. It's a framework. As long as the AI spending cycle holds, the bid holds. If it cracks, there's nothing underneath to catch the fall.
What's Next
Three things I'm watching next week:
01 — U.S.-China Tariff Details (Monday, September 28)
Treasury Secretary Bessent said the specifics of the trade truce extension will be released Monday. The framework extends through January 10, but the details matter — which products stay under tariff, which get relief, and whether there's a path to a broader deal. If the fine print is tighter than expected, the market gives back Thursday's diplomacy gains.
02 — Core PCE Price Index (Wednesday, September 30, 8:30 AM ET)
The Fed's preferred inflation gauge. After a PMI that showed the economy running at a four-year high, the PCE will tell you whether that activity is translating into higher prices. A hot reading cements the October hike. A cool one gives the Fed cover to wait. This is the single most important number for the rate path between now and the October meeting.
03 — Nonfarm Payrolls (Friday, October 2, 8:30 AM ET)
The September jobs report is the last major data point before the Fed's October decision. Last month's number came in at 162,000, well above expectations. If September repeats that or goes higher, the "economy is too hot" narrative hardens and another 25 basis points becomes the base case. If it misses, the market reprices the whole October hike in a single session.
The week that just ended proved one thing: the market can survive 5%+ yields as long as the AI trade and the diplomacy hold. Next week tests whether either one cracks.
That's it for today. Have a good weekend. I'll be back on Monday after the close.
