Equities Head for Third Consecutive Positive Trading Session: Oct. 5, 2026 — 2026-10-05
What moved & why: Declining oil prices (Middle East shipping normalized) paired with solid US services data bolstered risk appetite, though strong growth has driven Treasury yields sharply higher in bear-steepening fashion, testing equity resilience.
Cross-asset:
- Equities: All four major US benchmarks advancing; 9 of 11 principal sectors gaining; volatility protection instruments catching bids
- Rates/Treasurys: Treasury curve climbing led by duration; yields in "nosebleeds"; bond market suffering "brutal losses" despite equities relatively flat
- Dollar: Strengthened meaningfully on European sluggishness and political/regulatory headwinds limiting fiscal discipline abroad
- Oil/Commodities: Crude falling; non-energy commodities seeing higher prices and greater engagement
- Crypto: Sinking
Econ / Fed angle: ISM Services PMI at 54.9 (missed 55 consensus, down from 55.4); business activity, new orders, and exports all weakened, though employment and backlogs accelerated. Inflation subindex rose to 74 from 72.6 on fuel costs. Author expects core inflation to fall to 2.3% in next week's print alongside slow hiring, providing "breathing room for the Fed" and alleviating rate-hike fears. Heavy AI buildout borrowing and government spending driving credit demand and yield pressure despite cool domestic inflation backdrop.
Watch next: Next week's inflation print (core expected ~2.3%); midterm elections; geopolitical tensions in Middle East threatening energy infrastructure; risk of excessive AI regulation if "blue wave" occurs.