The 10-year Treasury yield finished Friday at 5.17%. The market has not held that level since June 2007, nearly two decades ago.
Thursday's intraday peak of 5.225% marked the week's high. Stocks rose anyway, and that tension frames this morning.
The S&P 500 rose 0.51% to 7,743.41 and the Dow gained 0.93% to 51,828.62. The Dow's weekly gain ended a three-week losing streak.
Microsoft's 3.8% jump led tech. The Russell 2000 rose just 0.07%, a sign the rally skipped the small caps most exposed to 5% borrowing costs.
The VIX fell 5.1% to 14.87. That sits well below its long-run average of roughly 19, a strange reading with the 10-year at a 19-year high.
Equity options are pricing a calm the bond market is not showing. Any hot data this week would test that gap first.
WTI fell about 2% to $92.75 and Brent slipped to about $104.45. TheStreet tied the drop to reports of U.S.-Iran talks on reopening the Strait of Hormuz within seven days.
Brent's premium over WTI is near $12, wide for a spread that usually runs in single digits. Energy-driven inflation is one reason traders are betting on more hikes, so a Hormuz headline today would move yields as well as crude.
Futures price a 71% chance of an October hike, up from about 64% earlier last week. The Fed already raised rates by 25 basis points on September 16.
Households are feeling it. University of Michigan sentiment fell to 48.1, a four-month low, which leaves spending data this week with little room to disappoint.
Monday has no major U.S. data releases, so Fed speakers will set the tone. Vice Chair Michelle Bowman speaks before the open, and Richmond Fed President Thomas Barkin speaks at 12:30 p.m. ET.
The Dallas Fed manufacturing index comes out at 10:30 a.m. ET, after a prior reading of 11.6. Another strong regional print would add to the growth story that pushed yields higher last week.
The U.S. Trade Representative is expected to release details of the U.S.-China trade agreements today. The week builds toward Wednesday's core PCE and Friday's September jobs report at 8:30 a.m. ET, and both will be read against a 10-year yield already above 5%.
