Fixed Income Update
US Treasuries caught a bid this week, with yields declining to their lowest levels in a month as tech shares slumped, creating demand for safe-haven assets, including US government debt.
On Thursday, shares of Intel, Amazon and Alphabet sold off after their quarterly earnings and projections disappointed investors. The selloff reignited concerns about the massive capital investments made in the race for AI supremacy and their implications for future economic growth and inflation. From a macro and rates perspective, these concerns suggest that even some of the biggest players in the AI space face challenges and may not be as insulated from rising capital costs as some investors suspect.
The equity market selloff and its impact on bond yields overshadowed economic data suggesting that, at least in the rearview mirror, the US economy remains remarkably strong. Real third-quarter GDP growth accelerated to a 3.4% annual rate, beating both the 3.2% consensus and the Atlanta Fed’s 3.3% estimate. And despite survey data showing sour consumer sentiment and still-elevated energy prices, domestic demand grew 5% in the third quarter, its fastest pace since Q2 2021. Stronger growth and increasing demand, along with the energy price shock, have helped fuel inflation this year. In fact, this week we learned that PCE inflation was hot again in September, rising 0.5% for the month, while core PCE rose 0.3%. Year over year, headline and core PCE inflation were 3.6% and 3.1%, respectively.
Against that inflation backdrop, the Fed held rates steady this week, saying that “the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the goal”. Two officials dissented in favor of a 25-basis-point hike, including Governor Lisa Cook, who has been in the spotlight over the past year as President Trump attempted to fire her over alleged mortgage fraud. The decision not to raise rates prompted considerable consternation in markets and the press, especially given this week’s growth and inflation data. However, late-week developments suggesting that cracks may be forming in the AI bubble could vindicate the Fed’s decision to pause rather than hike again while assessing the effects of its policy decisions on the broader economy and markets.
As of October 30, 2026
|
Index |
Current |
Last Week |
Wk Chg |
Last Year |
Yr Chg |
|
Tax-exempt MMF |
2.15% |
1.91% |
.24% |
2.78% |
-.63% |
|
Taxable MMF |
3.91% |
3.89% |
.02% |
4.13% |
-.22% |
|
|
|
|
|
|
|
|
2-Year Treasury |
4.60% |
4.68% |
-.09% |
3.61% |
.99% |
|
5-Year Treasury |
4.73% |
4.81% |
-.07% |
3.72% |
1.01% |
|
10-Year Treasury |
4.93% |
5.00% |
-.06% |
4.10% |
.83% |
|
30-Year Treasury |
5.31% |
5.32% |
-.02% |
4.66% |
.65% |
|
5-Year Exp. Inflation |
2.49% |
2.47% |
.02% |
2.38% |
.10% |
|
|
|
|
|
|
|
|
2-Year Municipal** |
2.83% |
2.98% |
-.15% |
2.66% |
.17% |
|
5-Year Municipal** |
3.13% |
3.24% |
-.11% |
2.57% |
.56% |
|
10-Year Municipal** |
3.65% |
3.77% |
-.12% |
2.89% |
.76% |
|
30-Year Municipal** |
5.09% |
5.10% |
-.01% |
4.35% |
.74% |
|
|
|
|
|
|
|
|
Fed Funds |
4.00% |
4.00% |
.00% |
4.00% |
.00% |
|
Prime Rate |
7.00% |
7.00% |
.00% |
7.00% |
.00% |
|
Dollar*** |
$101.94 |
$101.81 |
$0.13 |
$99.53 |
$2.41 |
|
CRB |
$411.42 |
$418.60 |
-$7.18 |
$300.77 |
$110.65 |
|
Gold |
$3,905.80 |
$3,991.10 |
-$85.30 |
$4,015.90 |
-$110.10 |
|
Crude Oil |
$104.09 |
$103.27 |
$0.82 |
$60.57 |
$43.52 |
|
Unleaded Gasoline**** |
$3.29 |
$3.21 |
$0.08 |
$1.79 |
$1.50 |
* Composite A
** General Obligation AA+
*** Int'l value of the U.S. dollar (Avg. exchange rate between the dollar and 6 major world currencies).
**** Futures price per gallon
Stock Market Update
A rocky month for the US equity market continued this week. Investor sentiment was ultimately heavily influenced by this week’s slate of corporate earnings. Early strength in AI-linked stocks faded into heavy selling later in the week. Major US indices were higher through Thursday, but Friday morning’s decline positioned the major US indices for a mostly lower finish to the week.
AI sentiment initially showed early signs of benefiting from relatively upbeat earnings results last week. Additionally, AI funding concerns showed brief moments of dissipating early in the week as Meta Platforms announced an equity raise, and SpaceX announced a debt facility, both in support of AI infrastructure investment. In recent weeks AI financing concerns had supplanted strong AI compute demand as the AI narrative in focus. Anthropic’s initial public offering (IPO) filing also lifted technology sentiment early in the week; its Nasdaq debut is expected in November under ticker ANT. With some renewed enthusiasm behind the AI trade, the iShares Semiconductor ETF (SOXX) gained more than 9% on the week through Wednesday.
AI sentiment quickly reversed though after Alphabet’s (GOOGL) Wednesday afternoon earnings release. Despite robust third quarter growth for GOOGL’s Google Cloud business, Search revenue growth missed consensus expectations, and showed a slowdown from 17% to 12% quarter over quarter, raising concerns about AI’s effect on the business. GOOGL fell 12.6% Thursday, weighing on AI-linked names and major indices. Further high-profile earnings disappointments extended the selloff Friday. By Friday morning, the Nasdaq Composite was down more than 3% for the day, lower for the week, and down more than 5% in October. Additionally, the SOXX ETF surrendered weekly gains as it fell more than 10% across Thursday and Friday amid renewed AI monetization concerns.
The mid-week shift in AI sentiment prompted investors to rotate from technology into defensive and select cyclical sectors. Through Thursday’s close, the S&P 500 Communication Services sector was the week’s laggard, largely reflecting GOOGL’s decline, while Health Care and Industrials outperformed. Weakness in mega-cap technology stocks, and the broader AI trade, contributed to the equal-weighted S&P 500 outperforming its capitalization-weighted counterpart for the week.
The Fed held rates steady at 3.75%–4.00% on Wednesday. Its statement was viewed as having a hawkish tilt and neither it, nor Fed Chair Kevin Warsh’s press conference did much to change market expectations of a December rate hike from the Fed. The CME FedWatch Tool indicated a 72.4% probability of a 25-basis-point rate hike in December.
Investor focus next week will be on company earnings, ISM releases, labor data, and US midterm election results. Middle East diplomacy progress remains unclear amid reports that President Trump is nearing a decision on the prospect of renewed military action against Iran and a deal. Speculation has been that a US strike on Iran could follow next week’s midterm elections.
As of October 29, 2026
|
Index |
Current Week |
Month of Oct. |
YTD |
|
Dow Jones Industrial Avg. |
0.26% |
2.89% |
10.28% |
|
S&P 500 |
1.27% |
0.96% |
13.82% |
|
Nasdaq |
0.89% |
-2.51% |
13.18% |
|
MSCI EAFE |
1.28% |
-0.32% |
10.45% |
|
Russell Mid Cap |
1.89% |
4.59% |
16.98% |
|
Russell 2000 |
3.00% |
2.27% |
16.29% |
