Market week: stocks near a record, chips slide and US yields peak
In short
- US stock indexes ended the week higher, but small companies in the Russell 2000 lost almost 1 percent.
- The yield on the 10 year US government bond reached its highest level since 2002.
- Chip stocks fell sharply after the Financial Times reported that OpenAI revenue was lower than expected.
- Oil stayed expensive because of tension around Iran and a hurricane in the Gulf of Mexico.
US stock markets ended the week of 5 to 9 October higher, but a lot was moving underneath that calm headline. Chip stocks dropped, the yield on government bonds climbed to a level not seen since 2002, and the oil price swung with news from the Middle East.
This is a look back at what happened. It is not a forecast of what comes next.
The numbers of the week
On Friday 9 October the S&P 500 closed at 7,811.51 points, up 0.59 percent on the day. The Dow Jones ended at 51,655.01 and the Nasdaq at 27,366.17. According to TheStreet, the S&P 500 gained 0.95 percent over the week, the Dow 1.15 percent and the Nasdaq 0.19 percent. The Russell 2000, an index of smaller US companies, lost 0.91 percent and was the only major index in the red.
The sources differ slightly. The Glass Desk reports a weekly gain of 1.15 percent for the S&P 500 and gives 7,818.93 as Tuesday's record close. By that account the index finished Friday just below its record. The two sources do not arrive at exactly the same weekly figures.
Government bond yields peak
The biggest move came from bonds, not stocks. The yield on the 10 year US government bond closed Monday at 5.311 percent, the highest close since 2002, according to The Glass Desk. On Wednesday it touched 5.36 percent during trading, also the highest since 2002. On Friday it stood around 5.25 percent.
A higher yield means the US government pays more to borrow. At Wednesday's auction of 10 year bonds the yield came out at 5.300 percent. Government bond yields serve as a benchmark for other interest rates, including those for companies and mortgages, although how far this carries through differs by country and product.
Also on Wednesday, the Federal Reserve published the minutes of its September meeting. According to Babypips, most policymakers said another rate increase before the end of the year "would likely be appropriate". The minutes caused little stir, because market participants already expected a firm tone.
Chip stocks under pressure
Thursday 8 October was the hardest day for technology. The Financial Times reported that OpenAI's revenue in September, converted to a full year, was about 50 billion dollars, roughly 20 billion less than the figure of nearly 70 billion that had been circulating. CNBC wrote, according to CoinDesk, that the higher number had also included cloud revenue sharing deals.
The semiconductor index SOX fell 3.39 percent that day and the Nasdaq 100 fell 1.39 percent. Over the full week the SOX lost 4.30 percent. Individual companies were hit harder: according to The Glass Desk, Arm lost 13.40 percent over the week, Intel 12.26 percent and Nvidia 2.00 percent.
The contrast with the rest of the market was large. Nine of the eleven sectors in the S&P 500 ended the week higher. Utilities gained 3.97 percent, partly thanks to a nuclear power contract between Google and Constellation Energy.
Oil, Iran and a hurricane
Oil stayed expensive. On Thursday Brent rose 4.07 percent after attacks on tankers, in the Strait of Hormuz according to The Glass Desk and off Qatar according to CoinDesk. Hurricane Isaias also played a part by shutting in oil production in the Gulf of Mexico. The size differs by source: The Glass Desk mentions about 500,000 barrels a day, while TheStreet reports that nearly 63 percent of Gulf oil output was shut in.
On Friday President Trump said the United States would not attack Iran before the midterm elections on 3 November. Brent then fell early in the day to 103.20 dollars and closed at 104.72 dollars, according to The Glass Desk.
Telecoms and other movers
On Friday the telecom sector took a hit. SpaceX announced it would buy a package of mobile spectrum for about 8 billion dollars. T Mobile, Verizon and AT&T fell sharply. TheStreet reports losses of more than 10 percent at midday, while The Glass Desk gives closing losses between 8.7 and 9.3 percent. Apple lost about 2.2 percent after a Nikkei Asia report about lower component orders for the iPhone 18 Pro.
Consumer sentiment from the University of Michigan fell in the preliminary October reading to 46.3, from 48.1 in September. Economists had expected 47.6.
Why this matters
A positive weekly figure for the S&P 500 says little about what happens underneath. This week stocks, chips, small companies and bonds moved apart. Anyone who owns an index fund owns all of these parts at once, and the result is an average of winners and losers.
The high government yield also touches readers in the Netherlands and Belgium, because interest rates around the world are linked. In today's article on central banks you can read what the ECB and the Fed said themselves.
Next week the US inflation figure for September is due on Wednesday 14 October, and the big banks start reporting quarterly results. The next Fed meeting is on 27 and 28 October.
This piece is news and explanation. It is not advice to buy, sell or hold anything.
