Yields Hit a 2007 High, Stocks Rally Anyway — This Week's Tug-of-War
Friday was a study in cognitive dissonance: the 10-year Treasury touched 5.23% — its highest since 2007 — yet the S&P 500 climbed 0.5%, giving stocks their first winning week in three, thanks to cheaper oil.
What Happened
The S&P 500 rose 0.51% to 7,743.41, near its record, Dow +0.93%, Nasdaq +0.48%. The Russell 2000 lagged (+0.07% Friday, −0.8% on the week). WTI crude fell ~2.2% to ~$92.40 as U.S.–Iran talks raised hopes of reopening the Strait of Hormuz. The 30-year Treasury hit 5.5252%, its highest since 2004. Microsoft +3.7% on new Copilot tools; Akamai +3.2% on a reported $11.6B Anthropic cloud deal. Michigan sentiment hit a four-month low of 48.1, with 1-year inflation expectations up to 4.6% — even as August retail sales rose 1.2%.
Why It Matters
Stocks and bonds are telling opposite stories. Equities bet the Fed's September hike to 3.75–4.00% — its first in three years — suffices; bonds price ~70% odds of another quarter-point hike October 27–28, with two more implied this year. With 30-year mortgages at 7.45%, every data print becomes a verdict.
Under the Hood
Breadth was weak — more Nasdaq decliners than advancers on a green day — and $202B in Treasury coupon settlement lands Wednesday amid quarter-end repo dynamics.
What Hedgehog Is Watching
Wednesday: August core PCE (consensus 0.3% m/m, ~3.4% y/y) — a hot print puts a November follow-up hike in play. Also ADP (+70K expected), final Q2 GDP, and Micron earnings. Friday: the jobs report (~100K payrolls, 4.1–4.2% unemployment). Tuesday: JOLTS + consumer confidence; Thursday: ISM manufacturing (54.8 expected) + Nike.
Stocks just had their best week in three on cheaper oil and AI enthusiasm, while bonds keep raising the bar. Wednesday's inflation print and Friday's jobs report decide who blinks. Don't confuse a relief rally with a resolution — the rates question isn't settled, it's scheduled.
Sources: AP, Reuters, TradingEconomics, WSJ, CME FedWatch, U. Michigan Surveys of Consumers, Mortgage News Daily, U.S. Census Bureau.