Bull Bear Report

The bond market ran the show this week. On Thursday, the 10-year Treasury yield touched 5.34%, its highest level since April 2002. It eased back to roughly 5.28% by Friday. The 30-year yield pushed toward 5.67%. Stocks absorbed the shock better than you might expect. The S&P 500 slipped 0.3% to 7,722.72. Meanwhile, the Nasdaq-100 gained 0.7% as Nvidia set a record, topping $5.7 trillion in market value. The Dow lagged, with banks and other rate-sensitive names taking the brunt.

The S&P 500 gained 1.2% this week to close at 7,744.64. That leaves the index up 13.1% for the year and just 0.7% shy of its August 13 record close of 7,798.99. While that is a bullish headline, the real story was in the bond market.

Unsurprisingly, this past week's market action belonged to the Federal Reserve. On Wednesday, the FOMC delivered its first rate hike since 2023, lifting the funds rate to 3.75%-4.00%. While the hike was widely expected, the 12-0 vote and the lack of rate cuts scheduled in 2027 shocked the markets. Furthermore, Kevin Warsh made clear that more hikes could follow.

September, so far, is living up to its reputation. The market slipped to the 50-day moving average, with the tape taking orders from crude oil. For the week, crude rose about 9% over four sessions, which pulled the 10-year Treasury yield higher right along with it, closing just under 5%. The corners of the market that hate higher rates slid while the S&P 500 dipped 0.68% to close the week at 7,666. However, that rather lackluster headline conveniently hides the real story beneath it.

This was a decently boring week that ended just about where it began. The S&P 500 closed Friday at 7,718.60, up a rounding-error 0.1% for the week; however, that flat headline hid a decently bumpy five sessions. Stocks dipped early as oil spiked on fresh Middle East hostilities, recovered midweek when Fed Governor Chris Waller struck a dovish note, and yields eased, then handed it all back Friday when the August jobs report landed hot.

If you look at the market headline, the bulls won this week. However, the internals told a different story with the S&P 500 closing Friday at 7,711.76, up 0.5% on the week, while the Nasdaq Composite added 0.9% to 26,402.42.

The week belonged to the bond market. Long-dated Treasury yields spiked to levels not seen in decades, with the 30-year touching a 19-year high above 5.30% mid-week and the 10-year closing Friday at 4.738%, near a 20-month high. Those seem to be really scary numbers, but as discussed on Friday, this is just a return to normalcy after 15 years of abnormally low rates.

This past week, stocks pushed to a fresh record, then gave a little back on Friday as inflation came in softer-than-expected. Both CPI and PPI prints cooled the case for a September rate hike, and Friday's weak retail sales report and a softer read on consumer sentiment nudged the index down about 0.2% into the close.

The week the labor market cracked was the week stocks had their best run since April. Friday’s close of 7,757.64 on the S&P 500 set a record, up 3.6% over five sessions. The Nasdaq Composite gained 5.2% to 26,690.62, and the Dow added roughly 3% to 54,036.93.

The S&P 500 closed the week at 7,489.72, up 1.1%; however, that headline hides nearly everything that mattered.

The S&P 500 finished the week at 7,411.98, down about 0.6%, as an AI capex scare and an oil shock collided into its second straight weekly decline and the first back-to-back down weeks since March. The headline number hides what actually happened. Underneath a falling index, the average stock held up just fine.

The headline number this week was boring, but the action underneath was not, as the momentum meltdown was tearing through the market's most crowded trade. The S&P 500 slipped about 1.5% to close at 7,457.69, the Nasdaq 100 gave back roughly 4%, and the Dow held up with a fractional loss.