Rising Yields End the Market Rally
U.S. stock indexes finished Thursday lower, halting their record-setting rally. The S&P 500 fell 0.28%, the Dow Jones Industrial Average dropped 0.52%, and the Nasdaq 100 slipped 0.15%. The 10-year Treasury yield climbed to 4.14%, sparking a wave of profit-taking, especially in semiconductor and AI infrastructure stocks.
Despite the pullback, the market spent most of the week near record highs, supported by optimism over corporate earnings growth in the AI sector and expectations that a resilient U.S. economy will continue to perform well under a gradual Fed easing cycle.
Strong Earnings Lift Select Stocks
Some companies posted strong results that helped offset broader weakness. Delta Air Lines rose more than 4% after raising its full-year EPS forecast, while PepsiCo jumped over 4% on stronger-than-expected Q3 revenue. Costco reported a 5.7% increase in comparable September sales, beating analyst forecasts.
Meanwhile, semiconductor stocks dragged markets lower. Shares of Dell, Micron, Marvell, Qualcomm, and others fell between 1% and 5%. Homebuilders such as PulteGroup, Toll Brothers, and DR Horton declined after CFRA downgraded the sector to “sell.”
Fed Comments and Shutdown Add to Uncertainty
Comments from Federal Reserve officials gave mixed signals. Fed Governor Michael Barr urged caution in cutting rates further, warning that tariffs could fuel inflation. Conversely, New York Fed President John Williams said he would support rate cuts later this year if the labor market weakens as expected.
Political instability also weighed on sentiment. The U.S. government shutdown has entered its second week, halting the release of key economic reports such as payroll data and inflation figures. Bloomberg Economics estimates that around 640,000 federal workers have been furloughed, which could push the unemployment rate to 4.7%.
Investors Flock to Gold and Bitcoin
As the shutdown drags on and geopolitical risks rise, investors are seeking safety in alternative assets. Gold surged to a new record above $4,000 an ounce, while Bitcoin also strengthened.
These moves reflect growing concerns over potential economic slowdown and uncertainty surrounding U.S. fiscal and monetary policy.
Global Markets and Macro Outlook
Overseas markets ended mixed. The Euro Stoxx 50 dropped 0.43%, while China’s Shanghai Composite jumped 1.32% after a week-long holiday, reaching a 10-year high. Japan’s Nikkei 225 climbed 1.77% to another record close.
In the bond market, the German 10-year bund yield rose to 2.70%, and the U.K. 10-year gilt yield increased to 4.75%. The ECB’s September meeting minutes struck a slightly hawkish tone, signaling caution against further rate cuts amid persistent inflation risks.
Market Outlook
Investors are now focused on Friday’s release of the University of Michigan consumer sentiment index, expected at 54.0. Markets are pricing in a 95% probability of a 25-basis-point Fed rate cut at the upcoming October meeting.
Despite short-term volatility, strong corporate earnings and continued economic resilience remain key bullish drivers for U.S. equities in the medium term.
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