Stocks Erase Gains as Inflation Risks Push Bond Yields Higher
The S&P 500 Index ($SPX) (SPY) is down by -0.27% today, the Dow Jones Industrial Average ($DOWI) (DIA) is down by -0.48%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -0.18%. December E-mini S&P futures (ESZ26) are down -0.32%, and December E-mini Nasdaq futures (NQZ26) are down -0.21%.
Stock indexes gave up an early advance today and turned lower, with the S&P 500 falling to a 1.5-week low and the Dow Jones Industrial sliding to a 3.5-month low. Ever-rising crude oil prices are raising inflation risks and pushing global bond yields higher, weighing on stocks. WTI crude oil is up more than +1% today, boosting inflation expectations and pushing the 10-year T-note yield up to a 24-year high of 5.34%. The 10-year UK Gilt yield also rose to a 19-year high of 5.50%, and the 10-year Japan JGB yield rose to a 30-year high of 3.13%. Massive government borrowing and strong investment in artificial intelligence infrastructure are also boosting demand for capital and pushing global bond yields higher. Stocks remained lower and bond yields remained higher after the Sep ISM prices paid sub-index rose more than expected to a 5-month high, signaling inflationary pressures.
Stocks initially moved higher today after an upbeat forecast from Micron Technology bolstered expectations that ramped-up AI spending will continue. Micron Technology, the largest US maker of memory chips, forecasts revenue of about $61.5 billion in fiscal Q1, which runs through November, well above the consensus of $56.8 billion, signaling AI investment spending remains strong.
Signs of a stable US labor market also supported stocks after weekly initial unemployment claims unexpectedly fell to a 10-week low and continuing unemployment claims fell to a 3.5-year low.
US weekly initial unemployment claims unexpectedly fell -1,000 to a 10-week low of 197,000, showing a stronger labor market than expectations of an increase to 200,000. Weekly continuing claims unexpectedly fell -11,000 to a 3.5-year low of 1.701 million, showing a stronger labor market than expectations of an increase to 1.725 million.
The US Sep ISM manufacturing index unexpectedly fell -0.1 to 54.5, weaker than expectations of an increase to 55.0. The Sep ISM prices paid sub-index rose +8.8 to a 5-month high of 77.9, stronger than expectations of 73.0 and a sign of price pressures.
US Aug construction spending rose +0.9% m/m, stronger than expectations of no change.
Minneapolis Fed President Neel Kashkari said he doesn't know how high interest rates will have to go to cool prices, adding that it's the Fed's job to tame inflation and "we will do what we need to do to get inflation back down to our target."
Nov WTI crude oil prices (CLX26) are up more than +1% today on the failure of the US and Iran to reach a lasting peace agreement that would fully reopen the Strait of Hormuz, keeping global oil supplies tight. Also, Russia on Wednesday announced it was extending a ban on most diesel exports through October, further tightening global energy supplies.
Markets are discounting a 34% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.
Overseas stock markets are mixed today. The Euro Stoxx 50 fell to a 3.5-month low and is down -1.39%. China's Shanghai Composite did not trade, with markets in China closed for the week-long Golden Week holidays. Japan's Nikkei-225 Stock Average rallied to a 6-week high and closed up sharply by +3.30%.
Interest Rates
December 10-year T-notes (ZNZ6) are down -2 ticks today. The 10-year T-note yield is up +0.9 bp to 5.294%. Dec T-notes fell to a 24-year nearest-futures low today, and the 10-year T-note yield climbed to a 24-year high of 5.340%. Today’s +1% increase in WTI crude oil is pushing inflation expectations higher and weighing on T-notes. The 10-year breakeven inflation rate rose to a 2-week high of 2.38% today. Also, signs of strength in the US labor market are hawkish for Fed policy and bearish for T-notes after weekly jobless claims unexpectedly fell to a 10-week low. In addition, rising price pressures are undercutting T-notes after the Sep ISM prices paid sub-index rose more than expected to a 5-month high
T-notes have some support from bond dealer short-covering after Paramount Skydance priced an eight-part $30 billion corporate debt offering on Wednesday, prompting bond dealers to lift short hedges placed on T-notes ahead of the offering.
European government bond yields are mixed today. The 10-year German bund yield is down -4.2 bp to 3.544%. The 10-year UK gilt yield rose to a 19-year high of 5.504% and is up +1.3 bp to 5.437%.
The Eurozone Sep S&P manufacturing PMI was revised upward by +0.2 to 52.9 from the previously reported 52.7, the fastest pace of expansion in 4.25 years.
The UK Sep S&P manufacturing PMI was revised downward by -0.1 to 51.9 from the previously reported 52.0.
Markets are discounting a 20% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.
US Stock Movers
Homebuilders and building supplies are under pressure today as the 10-year T-note yield rises to a 24-year high of 5.34%, raising mortgage rates and weighing on housing demand. DR Horton (DHI) and Builders Firstsource (BLDR) are down more than -3%, and Pulte Group (PHM), KB Home (KBH), Lennar (LEN), and Home Depot (HD) are down more than -2%. Also, Toll Brothers (TOL) is down more than -1%.
Accenture (ACN) is up more than +19% to lead gainers in the S&P 500 and IT services stocks after reporting Q4 revenue of $18.7 billion, above the consensus of $18.04 billion. Also, Globant SA (GLOB) and Cognizant Technology Solutions (CTSH) are up more than +7%, and EPAM Systems (EPAM) is up more than +6%. In addition, Gartner (IT) is up more than +4%, and International Business Machines (IBM) is up more than +3% to lead gainers in the Dow Jones Industrials.
Energy producers and service providers are climbing today, with WTI crude oil up more than +1%. Marathon Petroleum (MPC) is up more than +4%, and APA Corp (APA) and Valero Energy (VLO) are up more than +3%. Also, Occidental Petroleum (OXY) and Phillips 66 (PSX) are up more than +2%, and ConocoPhillips (COP) and Devon Energy (DVN) are up more than +1%.
Corteva (CTVA) is down more than -84% to lead losers in the S&P 500 after a federal court denied California’s request to temporarily block Corteva’s planned business spinoff.
NVR Inc. (NVR) is down more than -2% after Morgan Stanley initiated coverage of the stock with a recommendation of underweight and a price target of $5,058.
Vicor (VICR) is up more than +11% after raising its Q3 sequential revenue growth forecast to more than 30% from a prior view of more than 20%.
Synopsys (SNPS) is up more than +10%, adding to Wednesday’s +4% rally and leading Nasdaq 100 gainers after signing a deal with Amazon.com valued at over $1 billion over multiple years.
Rocket Lab (RKLB) is up more than +2% after Citigroup initiated coverage on the stock with a buy rating and a price target of $105
Earnings Reports (10/1/2026)
Accenture PLC (ACN), Acuity Inc (AYI), American Resources Corp (AREC), McCormick & Co Inc/MD (MKC), NIKE Inc (NKE).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.