S&P 500 — The Market Trades a Rate Peak, and the Rally Broadens

1 · This Week's Action

The index and the market under it. The S&P 500 fund rose 1.16% to 778.57 — a record close of 779.09 on Tuesday, through the August high of 777.88 this letter carried as the line above. The Nasdaq 100 fund rose only 0.23% to 751.27, after its own record close of 759.66 on Tuesday. The equal-weight S&P rose 1.58% — the average stock beat the index, and the index beat the Nasdaq. Small caps fell 0.92%.

Last week this letter wrote that the Nasdaq made its record while the market underneath made its low. This week the order turned: the Nasdaq 100 without its tech stocks rose 2.35% to 98.15, back above 96.92 — the first sign of a turn this letter named a week ago — while the tech half of the Nasdaq 100 fell 1.42%. The S&P 500 without tech rose 2.14%.

The macro — a hawkish week that traded like a peak. The news on rates was not friendly. On Wednesday the Fed's September minutes pointed to another rate hike by year-end. On Monday the ten-year Treasury yield touched 5.35%, and the ten-year real yield — the TIPS yield, what the government pays above inflation — closed at 2.95%, its highest since November 2008. By Friday the ten-year was back at 5.24% and the real yield at 2.91%; the long-bond fund made a new low close on Monday and ended the week up 0.65%. The market read the week the other way from the minutes: it bought the sectors that live on interest rates and sold the ones that live on next year's capital spending.

The eleven S&P 500 sectors

Ten of eleven green — and every one of the ten did better than technology. Utilities +3.97%, staples +3.60%, energy +3.60%, health care +2.79%, consumer discretionary +2.55%, financials +2.32%, real estate +1.96%, materials +1.17%, communications +0.05%. The two red: technology −0.52% and industrials −0.41%. Last week three sectors rose and technology was the best of them. This week technology was the worst.

The bottoms came in a sequence. The rate-sensitive sectors did not turn on the same day; they turned one after another over eight sessions, and the order is the read of the week:

• Utilities on 28 September — 39.25, now 41.41, +5.5% off the low and back above the 20-day average.
• Financials on 30 September — 53.40, now 54.73, +2.5%, every close since above it and Friday's the highest since 25 September; the fund sits exactly on its 20-day average.
• Staples on 1 October — 80.33, now 83.43, +3.9%, with a 2.1% jump on Thursday.
• Health care on 2 October — 166.18, a higher low than the 165.36 of 11 September, now 170.81, +2.8%, back above its 50-day average.
• Real estate on 7 October — 40.57, now 41.61, +2.6%.

Defensives first, then the financials, then property. That is the order a market moves in when it starts to price the end of a rate rise — and it started while the central bank was still talking about the next one.

Consumer discretionary — the cap-weighted fund and the average. XLY rose 2.55% with Amazon +4.3% and Tesla +3.3% — but the move was not two names: the equal-weight discretionary fund rose 1.58% and the equal-weight retail fund 1.77%. XLY is still 9.4% under its January high and 1.4% under its 50-day. The one corner of the consumer that did not rise is the one most tied to mortgage rates (below).

Breadth — the financials came back to life. A week ago not one of the 76 financial stocks in the S&P closed above its 20-day average. On Friday 29 did — 38% — and 71% were above their 5-day. Above the 50-day it is still only 20%: a turn, not yet a trend. In energy 20 of 21 members closed above their 5-day average; in health care 44 of 59. In technology 68% of members are above the 50-day — the sector that fell this week is still the one in the best shape underneath.

What has not joined yet. Three groups that usually lead a true rate peak fell this week:

• Homebuilders: ITB −2.17% to 84.76, XHB −2.00% — 25.4% and 21.9% under their February highs, 8.7% and 7.1% under their 50-day averages.
• Banks: the equal-weight bank fund −1.91%, regional banks −2.50% — both made their low close on 7 October and sit on it; brokers rose 1.48%.
• Small caps: −0.92%, 4.3% under the 50-day.

The money bought the large, the defensive and the cash-rich. It did not yet buy what depends on a cheaper mortgage or a cheaper loan. That gap is the measure of how much of the peak the market believes.

The Nasdaq 100, cut six ways

The week: the Nasdaq 100 without tech +2.35%, the S&P 500 without tech +2.14%, the S&P +1.16%, the S&P 500 without the Magnificent Seven +1.05%, the Nasdaq 100 +0.23%, the Nasdaq 100 tech sector −1.42%. On the year the order is unchanged: Nasdaq tech +44.0%, the Nasdaq 100 +22.3%, the S&P +14.2%, the S&P without tech +5.6%, the Nasdaq without tech −1.2%. One week does not undo a year; it does show where the next dollar went.

Momentum against low volatility. Momentum fell 1.35%, low volatility rose 1.76%. The momentum/low-vol ratio fell 3.1% on the week — still above its 50-day and still in the 96th percentile of its range. The defensive end was paid; the aggressive end gave back a little of a very long lead.

The tech ETFs we carry

Software up, silicon down. Cybersecurity +5.06% to 110.00, cloud +4.51% to 30.11, software +3.91% to 112.67 — the last two at their highest closes of 2026. The chip funds: SOXX −5.01% to 559.40, XSD −4.91%, SMH −4.32%, the fabless fund −2.84%. The software-over-semis ratio rose 8.6% in one week and is now 43% above its June 22 low. Thursday did most of it: the chip index fell 3.4% on a report that put OpenAI's revenue nearer 50 billion dollars than 70 billion, and software rose the same day and again on Friday.

The names in one line each. Zscaler +18.9%, GitLab +10.7%, Palantir +10.8%, Atlassian +10.1%, Okta +9.8%, Veeva +8.3%, Snowflake +8.2%, MongoDB +7.8% on the way up; Aehr −21.1%, IREN −15.7%, Arm −13.4%, Nebius −9.0%, CoreWeave −8.4%, SanDisk −8.0%, Coherent −7.3%, KLA −5.5%, Micron −4.3%, Nvidia −2.0% on the way down. The Magnificent Seven fund rose 1.63% — Microsoft +3.4%, Amazon +4.3%, Alphabet +2.4% — and closed at 73.77, a record close of 73.90 on Tuesday.

The four indices: Dow, S&P 500, Nasdaq 100, Russell 2000

The S&P 500 +1.15% to 7,812, the Nasdaq 100 +0.24% to 30,883, the Russell 2000 −0.94% to 2,806. The S&P and the Nasdaq made records on Tuesday; the Russell is 8.5% under its August high. The Dow sits between them on the chart. Two of the four at their highs, one in the middle, one still well under: the broadening is in the large caps, not yet in the small ones.

The Treasury curve, one month to thirty years

Over the month the whole curve rose — the 2-year to 4.79%, the 10-year to 5.24%, the 30-year to 5.62% on the vendor curve — and over the week the long end eased: the ten-year from its 5.35% touch on Monday to 5.24%, the thirty-year to 5.60% on the sovereign board. The real yield did the same in miniature: 2.95% on Monday, 2.91% on Friday. The level is the highest since 2008; the direction, for one week, was flat to lower.

The dollar

The dollar index rose 0.29% to 102.23, the dollar fund made a new high close of the year on Wednesday. A dollar at its high in a week the market priced a peak in rates is a contradiction worth watching: either the dollar is pricing growth that keeps rates up, or the stock market is early.