Wednesday, 10/7/2026 a.m.

• Stocks trade lower following fresh record highs – After the S&P 500 and Nasdaq reached new all-time highs on Tuesday, U.S. equities are trading lower Wednesday morning, with renewed upward pressure on bond yields weighing on stocks, in our view. Overseas, Asian markets were mostly lower overnight, while European markets are also trading lower as investors digest another increase in French government bond yields. Concerns about the country’s fragile fiscal position and political uncertainty ahead of next year’s French presidential election continue to weigh on sentiment. Higher European government bond yields are being accompanied by upward pressure on U.S. yields, even in the absence of a clear domestic economic catalyst. The 10-year U.S. Treasury yield opened the day near 5.36%, while the 30-year yield rose to approximately 5.72%. Higher U.S. yields and political uncertainty in Europe are also supporting the U.S. dollar, particularly against the euro, with the DXY U.S. Dollar Index trading at its highest level since the spring of 2025. In commodity markets, oil prices are modestly higher to begin the day, with WTI crude trading near $90 per barrel.
   
• Bond yields climb higher – Government bond yields are moving higher globally on Wednesday morning, with the 10-year U.S. Treasury yield back above 5.3% and the 30-year yield above 5.7%. Although there has been no single U.S. economic catalyst behind today's move, several factors appear to be contributing. French government bond yields have risen sharply, reversing yesterday’s decline, as concerns about the country’s fiscal outlook and political uncertainty continue to weigh on investor sentiment. Prospective corporate debt issuance may also be adding to the pressure, with SpaceX reportedly seeking to raise approximately $40 billion to finance purchases of semiconductor chips. Oil prices are also higher amid continued tensions between the U.S. and Iran, reinforcing concerns about inflation and the outlook for interest rates. The increase in yields has weighed on fixed-income performance, leaving U.S. investment-grade bonds down nearly 3% year to date. However, with income playing an important role in multi-year bond returns, the recent move higher in yields bodes well for future investment-grade bond returns, in our view. While we continue to see greater near-term opportunity in equities than in bonds, higher yields help reinforce fixed income’s strategic role in diversified portfolios by offering attractive income and potential diversification benefits during periods of slower economic growth, in our view.
   
• Earnings season on the horizon – It is a quiet week for both earnings releases and economic data, with investors looking ahead to the unofficial kickoff of third-quarter earnings season next week, when several large U.S. financial-services companies are scheduled to report. Earnings growth has been a key driver of this year’s equity-market gains, with S&P 500 earnings per share rising 27.2% and 49.6% year over year in the first and second quarters, respectively. Earnings are expected to increase by more than 27% again in the third quarter. The strength in earnings has reflected a combination of robust profit growth in sectors exposed to AI-related spending, including technology, communication services and consumer discretionary, as well as strong results in the energy sector amid higher oil prices. Encouragingly, there are also signs that corporate profit growth is extending beyond the largest publicly traded U.S. companies. NIPA corporate profits, a broad measure of profits across the U.S. corporate sector published by the Bureau of Economic Analysis, rose 26.6% year over year in the second quarter, the strongest increase outside of post-recession periods since 2012. Although elevated borrowing costs and geopolitical uncertainty pose risks to economic and market momentum, recent data suggest that broader economic conditions and corporate profit growth remain on solid footing. In our view, this resilience should remain an important source of support for equity markets through year-end.

Brock Weimer, CFA
Investment Strategy

^{Source for all data: FactSet.}