Fixed Income & Equities Markets Week in Review

US equities delivered a volatile first full week of the fourth quarter. The Nasdaq Composite and S&P 500 Index reached record highs early in the week, supported by renewed enthusiasm for the AI trade, before volatility returned later in the period. Despite US Treasury yields near multidecade highs, elevated oil prices, and expectations for additional Federal Reserve (Fed) tightening, the major indexes remained relatively resilient.

Investors initially looked past elevated Treasury yields as strength in semiconductor stocks helped to lift both the Nasdaq and S&P 500 to new all-time highs. Evidence of robust computing demand and momentum in agentic AI continued to support the theme. However, sentiment weakened Thursday after reports indicated that OpenAI’s annualized revenue stood at approximately $50 billion at the end of September, about $20 billion below estimates. The shortfall challenged demand expectations and intensified market scrutiny of AI infrastructure funding. Despite Thursday’s setback, the Nasdaq remained on track for a weekly gain as of Friday morning.

Oil prices finished below their weekly highs but remained elevated, with West Texas Intermediate crude trading above $91/barrel Friday morning. Prices rose as activity in the Middle East intensified and the US weighed possible military action against Iran ahead of the midterm elections. President Trump subsequently stepped back from potential pre-election strikes and highlighted productive talks with Tehran. Nevertheless, regional attacks have escalated in recent weeks. Continued geopolitical risk could complicate the Fed’s policy path by increasing energy price pressures and related inflation concerns.

Higher bond yields and a hawkish Fed remain headwinds for US equities. Although the 10-year Treasury yield retreated from a multidecade high early in the week, the yield backdrop continues to pressure equities, particularly smaller companies and rate-sensitive sectors. Since August 31, the Russell 2000 Index has declined 5.3%, while the S&P 500 Real Estate sector has fallen 6.4%. Over the same period, the S&P 500 has advanced more than 1%, supported by a cohort of mega cap names, including Meta Platforms, up 26.0% in that timeframe. Market breadth narrowed substantially during the third quarter, reinforcing the importance of looking beneath headline index returns. Encouragingly, participation has improved modestly in the fourth quarter, with the equal-weighted S&P 500 moderately outperforming its capitalization-weighted counterpart month to date. That follows a third quarter in which the equal-weighted index lagged the S&P 500 by more than 4%.

The major indexes have not yet been materially impaired by higher yields, but several areas of the market are under pressure from elevated rates and other macroeconomic headwinds. As third-quarter earnings season begins, consensus expectations call for S&P 500 earnings growth above 25% for a third consecutive quarter. The coming weeks will show whether corporate results and forward guidance can continue to support US equities amid these challenges.

As of October 08, 2026