• Mortgage rate pain keeps new home sales in the sub-700K range, but Sept posted volumes at the upper end of 2026.

• Median prices ticked up higher off the lows and edged above the $400K line.

• The South region is the main event each month at 61% of total sales, and the MoM decline of -6.6% contrasted with the +21.4% in the West with its 21% share of the total.

• Mortgages at 7.32% per Freddie Mac were up from 6.19% last year and remain a major headwind for monthly payment affordability.

The above chart updates the new single family home sales series from 1963, and the current 676K (SAAR) is above the long-term median (637K). The new home sales story has not changed much in 2026. Favorable demographics and pent-up demand have been trumped by high mortgage rates and the intrinsic affordability strain of mortgage math.

Monthly payment pressures are the real “inflation” metric that matters these days more than MoM or YoY price deltas. The Mortgage News Daily Survey was at 7.33% to close last night. The most recent Freddie Mac benchmark rate from Thursday was 7.32%, up from 6.19% last year.

The threat of a move higher in mortgages cannot be ruled out with the 10Y UST next to the 5.0% level seen in the mortgage peak of Oct 2023 (see Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26, Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26).

The median price moved higher, back above the $400K line. The tight supply of entry level and starter homes also restrains headline volume totals.

The median of 989K in the housing boom/bust cycle from 2001-2009 is 46% higher than current volumes. As we look back to the peak of the housing bubble, we see 1389K in July 2005 at over 1.8x the Sept 2026 volume. The COVID panic buying and relocation spree in Aug 2020 saw sales of 1036K in a wild period for new home sales and home starts in a ZIRP market with very low mortgage rates.

The above chart plots the share of total home sales (new + existing) that were captured by the “new home” builders. We see the share is now at 14.5% vs. the long-term median of 11.7%. When inventory is scarce, the right home at the right price wins. In the “new vs. existing” contest, the need to refinance at much higher rates has penalized existing while the homebuilders have more room to offer incentives.

The challenge overall for new home sales has been mixed for builders by region. The headwinds have undermined “move up” demand for homebuilders with so many existing homeowners with mortgages and held back by “golden handcuffs.”

Major homebuilders generally continue to report gross margin compression in 2026 and guide to similar expectations for the year. We see lower prices from the builders even if that comes with the asterisk of product tier and geographic mix. Recent major builder results such as Pulte and NVR show lower prices and narrower gross margins as we have already seen in 2026. Industry leader D.R. Horton reports later this week.

The market edge for closing a sale favors builders vs. existing home sales (note: existing is still the vast majority of sales volume). Homebuilders have the ability to use incentives and financing support, and the homebuilder can tailor packages to close sales.

In new home sales, the gap between the expectations of the seller and buyer is easier to bridge through the incentive programs or the ability to offer variations in home design and specs to make a transaction work.

The new home sales volumes are softer with total new homes down by -5.3% YoY. Prices posted this month moved back above the $400K line. The 10Y UST is the key benchmark for the direction of 30Y mortgages, and that has been moving in the wrong direction before the recent rally (see Weekly UST Deltas: Flight Effects vs. Inflation 10-25-26).

The CPI, PCE and PPI inflation metrics have been grim (we get Sept PCE inflation this week). May saw headline numbers over 4%. Even with some sequential easing from spring, confidence in lower mortgage rates is a challenge in the absence of major market turmoil and setbacks in the economy, which carry their own list of problems on the demand side. Oil plunging is one major X factor that would in theory offer relief for the yield curve and mortgages, but the odds now point at a major escalation with Iran.

The median home price time series tells a simple story that prices had been under modest pressure after a period of record highs and a long stretch over the $400K threshold with some dips below the $400K line. We had a dip below that threshold in June before being revised. For Sept, we are back above the $400K line at $400.4K.

The price moves can have a lot of contributing factors from mix to region, but a decline is consistent with the major builders reporting. The South’s lower ASP mix can factor in as a lower ASP region, but the “South” by itself has a very wide range as well. The South posted a -6.6% sequential MoM decrease in volumes (-0.7% YoY) in Sept while the high price West was higher by +21.4% MoM (-17.4% YoY).

The above chart gives a different visual angle on the median new home sales prices from early 2022. That is a lot of $400K handles with some sub-$400K outliers. The $385.4 in Aug 2026 is the lowest in the mix.

The price metrics can shift with regional mix as well as home price tiers and related supply issues. The affordability question is still more intertwined with the monthly payment pressures from mortgages. It is about more than price. Those monthly payments are very sensitive to mortgage rates more than home price moves.

The time series above updates the new single family home sales across the cycles since 1973 for the #1 and #2 regions of the South and the West. The 413K for the South is around 61% of the total of all single-family new home sales (SAAR) and marks a sequential decline of -6.6% from Aug 2026 and is down by -0.7% YoY.

The West at 142K is 21% of the total. For the month, the West was higher by +21.4% sequentially but down by -17.4% YoY. The South is running ahead of the long-term median of 314K while the West is below the median of 173K.

The timeline for new home sales for the smaller Midwest and much smaller Northeast market is detailed above. The Midwest (13% of Sept total) was -7.3% sequentially and -8.2% YoY. The Northeast market (5% of total) was +28.0% sequentially and +10.3% YoY.

• As we have covered the past two weeks, a massive UST rally set against rising inflation and an oil price spike above $100 makes for a strange mixture of inputs and dislocations from the usual cause and effect patterns. AI nerves seem to be taking over the broader story line.

• The increased focus on credit risk and rising credit derivative activity will naturally raise questions on whether the unlimited supply of debt and equity capital will get more disciplined, skeptical, and/or more defensive. That of course flows into pricing credit as well as equity capital when the AI ecosystem needs a lot more of both.

• Musk trash-talking credit quality in the neocloud subsector is not an aphrodisiac for more cheap and bountiful credit availability even if more investors get directed his way as he seeks domination of more business lines. As usual, he will likely succeed.

• The impressive UST curve rally rewarded bonds but is not the “good kind” of rally when oil and inflation is rising and core demand fundamentals remain steady in the overall economy.

• We get a slew of key feedback and data released this week including the FOMC statement, PCE inflation and income/outlays details, and the advance estimate for 3Q26 GDP. Framing flight-to-quality flows is a highly subjective call over time when inflation, oil, and UST supply chaos point at higher rates.

The above table updates the time horizon returns for the debt and equity benchmarks we monitor. We see bonds mounting a comeback with the past two weeks bringing substantial curve relief and supporting duration returns. We see two asset lines in positive range for the month. The trailing 3 months are still all negative and the same YTD.

The painful bear flattener YTD still rules even with the long end rally in the recent AI turmoil. The YTD 2Y UST ended last week at +122 bps YTD and the 10Y at +82 bps. That has been tough on financing costs for the consumer and industrials in areas such as vehicles and equipment but also for the 30Y mortgage rates driven by the 10Y. Housing is suffering.

The tech bellwethers had another mixed month with 5 of the Mag 7 posting negative returns and the Semiconductor ETF (SOXX) in the red and over 9 return points behind the Software ETF (IGV), which took the #1 ranking this week.

We already posted a commentary on the weekly returns for the broader group of 32 benchmarks and ETFs (see Weekly UST Deltas: Flight Effects vs. Inflation 10-25-26). The score of 24-8 was good news for breadth. The fact that the S&P 500 and NASDAQ were in the bottom quartile and the Russell 2000 and Equal Weight S&P 500 (RSP) were in the top quartile also revisited the obvious fact of tech domination at the headline level.

We already posted a commentary on the weekly Tech Check list and relative performance at the benchmark, ETF, and bellwether single name level (see Weekly Asset Returns: Tech Check 10-25-26). The week presented another picture of a “software/SaaS comeback” on the left in the top tier and “AI ecosystem valuation fear” in the bottom quartile. Meta was in last place despite a good quarter as capex anxiety remains a major theme.

The 1-month score for the broader mix of asset lines was 17-15 with tech in the red zone again leading the count in the bottom quartile. Communication Services (XLC) was in last with the Tech ETF (XLK) just ahead of it. NASDAQ was also in the bottom tier along with the Equal Weight NASDAQ 100 (QQEW).

Notably, the Equal Weight S&P 500 ETF (RSP) was in the top tier, but the S&P 500 was in the lower half of the 3^rd quartile in the red.

The winners included Energy (XLE) at #1 and E&P (XOP) at #2 with defensive and dividend heavy ETFs in the top tier. In a positive sign for bank health and earnings reports, the Regional Banks (KRE) and Financials (XLF) were in the top tier. The financial system vote of confidence matters in a volatile market.

The 1-month Tech Check mix shows the fallout from AI ecosystem jitters and repricing in semiconductor stocks as we covered along the way. The 11-21 score shows the comeback of software and SaaS names, which includes more than a few that are still in the red YTD as detailed in a chart further below.

We see 2 of the Mag 7 in the red spread across all the quartiles with 1 name (META) in the bottom quartile and MSFT and AAPL in the top quartile.

We see the bottom 6 all directly tied to semiconductors (INTC, AMAT, MU, AMD, SOXX) or AI infrastructure needs (DELL). Meta and Oracle were in the upper end of the bottom quartile. The Software ETF (IGV) is 17.7 points ahead of the Semiconductor ETF (SOXX).

The 3-month score for the broader group of 32 is 16-16 with 6 of 7 bond ETFs in the red despite the rally of the past 2 weeks. Only the short duration 1-3Y UST ETF (SHY) edged into positive range.

We see how energy costs hit Transports (XTN), which ranked last at -13.65%. That is ugly. The cost pressures have been flowing into any combination of margin erosion or inflation across numerous industries as evident in PPI and CPI readings. Energy (XLE) and E&P (XOP) accordingly took the top 2 slots with defensive and quality dividend sectors rounding out the top 4 with Health Care (XLV) and Consumer Staples (XLP).

The bottom tier also features Homebuilders (XHB) and Real Estate (XLRE). The slide in Industrials (XLI) should be watched since fixed investment and the macro cycle has been steady, but interest rates and cost stress can weigh on a wide range of manufacturing equipment categories globally. Tariffs and material costs are weighing on numerous subsectors.

The YTD returns for the broader group of 32 asset lines weighs in with a score of 22-10 with 6 of the 10 in the red comprised of bond ETFs.

Communication Services (XLC) holds down last place. XLC had poor performance from names such as AT&T (T), T-Mobile (TMUS), Take-Two (TTWO), and AppLovin (APP) along with mediocre performance from Meta (META) and Alphabet (GOOGL).

BDCs (BIZD) also felt the drag of private credit fears and challenges both real and imagined around underwriting excess and the quality of marks.

Homebuilders (XHB) felt the mortgage rate rise, the tariff costs, labor disruptions, and pricing and margin pressures across the builders.

The YTD story line shows Hi-Lo performance gaps that will be a scoresheet for the ages on returns with a 23-9 for positive vs. negative. The Hi-Lo differential (Dell vs. Intuit) is 311 points. If we throw out the Hi-Lo returns and use the next two (Micron vs, Oracle), we are still at a stunning 243 points.

Semiconductors and the AI ecosystem were off the charts while software and SaaS services names were a victim of fears around business models that the market is still trying to sort out.

The LTM returns at 23-9 reflect an increase in the number of negative LTM returns from a low single-digit asset count in recent months. The list was 31-1 at the end of June with only the BDC ETF (BIZD) in the red at that point at -13.5%.

We see 4 of the 7 bond ETFs in the red for the LTM period. We see positive returns for the short duration 1-3Y UST ETF (SHY), HY (HYG), and the EM Sovereign Bond ETF (EMB). Homebuilders (XHB) sit in dead last while Communication Services (XLC) is again near the bottom.

Much of the tech pain has been mitigated by the early 2026 windfalls and energy boom with 3 energy names in the top quartile (XLE, XOP, AMLP) joined by the Tech ETF (XLK). Even Transports (XTN) made the top quartile as travelers could revel in the wealth effects and even more recently push past the fare spikes. Freight and logistics names have benefited from the investment boom for the LTM period even as some have sold off recently on cost pressures and diesel pain.

See also:

Yield Curve Migration: Wrong Kind of UST Rally10-25-26

Weekly UST Deltas: Flight Effects vs. Inflation 10-25-26

Weekly Asset Returns: Tech Check 10-25-26

Weekly Returns: Benchmarks and ETFs 10-25-26

Synchrony as Consumer Credit Proxy: Steady as She Goes 10-21-25

The above chart updates the UST migration patterns that we update periodically as a visual memory jogger. The easing cycle was just about to flow into the market in mid-Sept 2024. We include the 9-16-24 curve as a pre-easing frame of reference just ahead of the FOMC meeting and 2024 election. We also include the pre-Iran UST curve (bombing started 2-28-26) and the Friday curve 10-23-26.

We include the 10-19-23 curve as a frame of reference since that was when the Freddie Mac 30Y mortgage rate hit 7.63% with the 10Y UST closing slightly under the 5.0% line. That period also saw some 8% mortgage rates in surveys outside of Freddie (Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26, Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26).

The main takeaway from the UST trends captured in the chart is that the cost of financing has moved sharply higher since late 2024 despite multiple easing moves in 4Q24. We don’t expect Team Trump (Bessent, Hassett, et al) to cite how much higher rates are now since 4Q24. They will just blame Biden.

The transition from tightening into easing across 2023 and into 2024 was a wild ride (see Footnotes & Flashbacks: State of Yields 12-29-24). Today, the market faces a mix of inflation pressure with an FOMC determined to move the needle closer to 2% (at least they say they are). A crack in AI valuations combined with higher inflation and sustained high oil prices is just one of many scenarios one can spin.

A big question is how the new Fed regime would trade off equity market volatility and a correction and/or bear market tied to a ”bubble shock.” Would that detour the FOMC from the inflation commitment? You know Trump would be screaming bloody murder for lower rates if AI cracked.

The question is whether a scenario of AI bubble downside would drive Team Warsh to a Greenspan-style flashback to 2001 or the early 1990s as the Fed sought to cushion the blow (see Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22, UST Moves: The 1990-1991 Risk Factor Pig Pile10-24-23). The idea was mega-easing would relieve stock market pressures on the consumer sector and bring systemic relief to some troubled banks at the time. The rising credit risk today and likely spike in hedging exposure will raise some “old but new” issues. Warsh will have more trouble getting the votes than Greenspan did.

After the prior week’s material bull flattener, we saw another this past week. The chart details UST deltas for the week as a fresh UST rally came despite oil (WTI) at $103 and rising CPI and PPI printed the week before. For now, the inflation angst is taking a backseat to equity defensiveness and sector rotation.

The price action for 10Y UST across Wed/Thurs saw moves from around 5.15% down to near 4.95% before ending Friday at 4.99%. We recently crossed the 5.3% line.

For this past week, the 2Y was -5 bps, the 10Y -9 bps, and the 30Y -10 bps. The prior week, the 2Y was -6 bps, the 10Y -15 bps, and the 30Y -17 bps. That was set against grim PPI numbers and unfavorable CPI releases (see Weekly UST Deltas: Bear Macro but Bull UST Move 10-18-26).

As we already covered in our weekly asset return recap, the bond ETFs were all positive this week. The odds of a hike in the upcoming FOMC meeting were down to 10% as we headed into the weekend. The Dec FOMC meeting shows odds of 400-425 bps at 68.9% while 425-450 bps odds are down to 7.3% from 51% 1 month ago.

Subject to how the AI mini-panic frames up in earnings season, that could leave room for more UST steepening again if oil stays ugly with the US-Iran escalation rhetoric and if the PCE inflation metrics come in hot. The lag effects of tariffs and new trade stress ahead seem to have fallen down the headline priority list with the sheer weight of AI fears.

There is also the risk that the US election turns into a bigger sociopolitical fiasco than the nightmare base case of widespread election rejection. That is a laundry list for another day.

For bonds, the higher real yields are a selling point in narrow context, but inflation is not going away as a wildcard. We get the PCE release this week, and that will shed some more light on inflation metrics in the sector trenches.

The PCE release will bring a more granular look at income and outlays and whether the consumer is outspending income and drawing down savings rates. We also get the advance estimate on 3Q26 GDP with the latest read on the critical growth line for personal consumption expenditure for 3Q26 and the PCE inflation rate for the quarter. Fixed asset investment has been critical, but PCE growth is still around 68% of GDP. That will be an important number coming just after the FOMC meeting.

Lower savings rates can be by choice (“never bet against the US consumer”) or by draining household savings. There is “dropping the credit card” by necessity to deal with higher costs (inflation across goods, services, health care premiums, at the pump, and to heat a home). Ford reports this week, and that brings another fresh look at an important consumer sector after GM’s recent report. Car buyer resilience has been impressive.

The chart details the weekly price returns on our Tech Check mix of benchmarks, ETFs, and single names. It was another tough week for the list with an overall score of 15-17. In general terms, software/SaaS carried the week in the top quartile while semi-related asset lines were more heavily weighted in the bottom tier.

We see the Semiconductor ETF (SOXX) in the bottom quartile at -3.08% with the Software ETF (IGV) at +5.99% in the top quartile for over a 9-point return differential on the week. The results show 5 of the Mag 7 in the red with Meta (META) sitting in last place and only Tesla (TSLA) making the top quartile. Apple (AAPL) was also positive in the 2^nd quartile.

The winners are heavy on Software and SaaS service names that had been beaten down by the AI scare (“SaaS-pocalypse”) and business model displacement fears. We see ServiceNow (NOW) at #1 with 4 of the top 5 in the software/SaaS bucket including FactSet (FDS), Adobe (ADBE), and the Software ETF (IGV). Those were joined by legacy bellwether IBM, who has also faced a lot of headwinds in 2026.

The bottom tier includes semiconductor-related names such as Applied Materials (AMAT) as a capex proxy, Intel (INTC), the Semiconductor ETF (SOXX), Advanced Micro (AMD), and Broadcom (AVGO). NVIDIA (NVDA) was negative near the bottom of the 3^rd quartile.

As we look back at the top quartile names this week, we see 4 of those still carrying negative returns on a YTD basis: Intuit (INTU) at -48.2%, Adobe (ADBE) at -24.6%, Tesla (TSLA) at -17.2%, and IBM at -14.4%. Other notable software/SaaS names in the red YTD include Oracle (ORCL) at -35.2% and Salesforce (CRM) at -6.2%.

The chart details benchmark and ETF returns with a 24-8 positive-negative score for the week. The sharp UST rally was set against sustained high oil prices with WTI wrapping the week at $103. More critical macro color will be out this week even as AI jitters remain a theme.

The FOMC meets this coming week, and we get PCE inflation along with a first look at 3Q26 GDP. Fresh inputs on the growth lines (notably PCE and investment) could make the Fed’s life more challenging when combined with oil and recent CPI/PPI news. The odds of a hike in this week’s FOMC meeting were down to 10% as we headed into the weekend. The Dec FOMC meeting shows odds of 400-425 bps at 68.9% while 425-450 bps odds are down to 7.3% from 51% 1 month ago.

Earnings this coming week include Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN) along with GE Vernova (GEV) with its important input on power generation and ties to AI demand and data centers. We get a key consumer durables update with Ford Motor after GM’s earlier constructive release as autos, which have seen SAAR rates hold in well and shown resilience in the face of consumer headwinds (financing costs, affordability).

The UST rally gets tied to defensive flight-to-quality volumes as opposed to inflation and oil. The immediate practical effect was that all 7 bond ETFs posted positive returns for the week with the long duration UST (TLT) in the top quartile.

The top quartile shows the effects of lower UST rates as investors backed off from tech, chased UST, and firmed up demand in the most rate-sensitive sectors (XHB, XLRE). Energy (XLE) and defensive Health Care (XLV) made the top tier.

After a rough stretch, the Russell 2000 popped into the top quartile while the large cap S&P 500 and NASDAQ landed in the bottom quartile. The Equal Weight S&P 500 ETF (RSP) was notably in the top quartile with the tech heavy S&P 500 in the bottom tier. The Tech ETF (XLK) was in the bottom tier.

Communications Services (XLC) posted a poor performance in dead last. META and GOOGL sold off with AI anxiety and worries around recurring capex demands. Borrowing needs tie back into the assumptions on “how much, how soon” around AI-related cash flow levels and balance sheet demands (on or off the company balance sheet).

“Credit” is a word showing up in valuation debates more often while loan/lease commitments expand, counterparty “credit lines” rise, and “interconnectedness risk” increases across the system. Favorable bank earnings and steady asset quality metrics help with some background noise around commercial real estate quality. Commercial and Industrial lending was solid. The Regional Bank ETF (KRE) posted at #1 this week.

• After a week where the UST curve and inflation moved in counterintuitive directions (inflation higher, UST lower) and tech equities going into a brief swoon, the moving parts are looking more chaotic with a brief VIX spike above 20.

• The market is signaling some questions around risk appetites (including tech credit), asset allocation (flight to quality for some?), and potentially reviewing underlying assumptions in AI valuation. Inflation pressures remain a threat in a robust earnings season so the conditions are still not UST friendly.

• The sharp rally in long UST came with a backdrop of materially adverse moves in inflation (PPI and CPI) with a $10 per bbl spike in crude across the $100 line. That should not be offering yield curve relief (see CPI Sept 2026: Does Chronic Inflation Need More Treatment 10-15-26, Macro Crosscurrents Rattle the UST Curve and Equity Valuations 10-15-26).

• The FOMC threat appears to be easing even as a strong earnings season gets underway (see Weekly UST Deltas: Bear Macro but Bull UST Move 10-18-26, UST Curves and Cycles: Today in Historical Context 10-18-26). The odds of a hike in the Oct FOMC meeting are now down to 17.2% for 400-425 bps range and 80.0% for the Dec meeting. The odds of 425-450 bps are down to 16.4% from over 44% 1 month ago.

The above table updates the time horizon returns for the debt and equity benchmarks we monitor. In contrast to last week with all negative for the month, we saw 1 of 4 fixed income lines edge back into positive range with the rally in the UST curve. For 3-months, the fixed income benchmarks are all still in the red. For the YTD period, only HY barely made positive range. Duration has been the enemy.

For equities, Russell 2000 remains under siege for 1-month and 3-months after a very good start to the year. Equity returns have been getting dialed back, but the YTD period remains very solid with the exception of the Russell 3000 Growth index. Russell 3000 value has been the winner.

For the tech bellwether table, the week only saw two asset lines in positive range with Apple and the Equal Weight S&P 500 ETF (RSP). The Mag 7 saw 6 of 7 in negative range with only Apple (AAPL) in positive return range. The Semiconductor ETF (SOXX) was punished at -11.8% and sits in last place and is negative for the 1-month and 3-month horizon even as it generated a dazzling + 64.1% YTD.

The Software ETF (IGV) beat SOXX this week with the Semiconductor sector slammed. We cover the tech pain in other charts in this commentary. For the YTD period, IGV has posted a total return of -1.26% vs. +64.1% for SOXX. The worst YTD performer on the list is Oracle (ORCL) at -33.3%.

We already addressed the 1-week return details in Weekly Returns: Benchmarks and ETFs (10-18-26). The 18-14 score showed the effects of tech beatdown on the right with a solid performance in higher quality dividend stocks, upstream energy, and bond ETFs on the UST rally.

We already covered the Tech Check performance in Weekly Asset Returns: Tech Check (10-18-26). The Tech Check mix turned in a horrid set of numbers with a score of 7-25 and some painfully bad returns in the semiconductor and AI ecosystem names (notably Dell).

The 12-20 score for the 1-month returns for the broader mix of 32 asset lines were hurt by 5 of 7 bond ETFs being in negative range. Refined product prices hit costs for Transports (XTN) while the BDC ETF (BIZD) and small cap Russell 2000 sat at the tail end of the bottom quartile with Regional Banks (KRE) also feeling pressure with a big earnings wave on tap from here.

Winners for the month include higher quality dividend stocks as some investors rotated to more defensive exposure. Higher quality dividend stocks are usually rewarded when longer UST rates decline. The top 5 included Consumer Staples (XLP) and Utilities (XLU) along with pharma and dividend heavy Health Care (XLV). Those joined Energy (XLE) and E&P (XOP) in the top 5.

The Tech Check mix had a rough month at a score of 12-20 as AI ecosystem and semi names broadly took a beating after the strong numbers generated across 1H26. We see Dell at -19.8% in dead last in the bottom tier joined by Intel (INTC), Qualcomm (QCOM), Micron (MU), and Broadcom (AVGO). From the software/systems side, we see Oracle (ORCL) and Salesforce (CRM) in the bottom quartile.

The Mag 7 shows 4 in the top quartile (MSFT, META, AAPL, and AMZN) with 2 in the 2^nd quartile (NVDA, GOOGL) and 1 in the 3^rd quartile (TSLA). The top quartile also includes some of the beaten-down software and SaaS names making a slow comeback including FactSet (FDS) at #1, Microsoft (MSFT) at #2, Palantir (PLTR) at #3 with META and AAPL rounding out the top 5.

The 3-month returns for the broader asset mix weighed in at only 10-22, so the summer and early fall setbacks were taking their toll despite solid 2Q26 earnings and decent expectations for 3Q26. The impact of oil-driven cost pressures was evident in Transports (XTN) ranking in last place. The UST curve pain hit Real Estate (XLRE).

The UST curve sent 6 of 7 bond ETFs into negative return range. Mortgage pressures have sent Homebuilders (XHB) into the red zone as monthly payment and affordability pressures weighed on performance along with some labor shortages in select cases and supplier chain costs tied to tariffs.

For the winners, oil prices brought good news for some with E&P (XOP) and Energy (XLE) at #1 and #2. Defensive sectors such as Health Care (XLV) and Consumer Staples (XLP) were in the mix with tech still posting decent enough numbers to get the Tech ETF (XLK), NASDAQ and the S&P 500 in the top tier. Materials ETF (XLB) was still riding the advantage of higher petrochemical prices combined with lower natural gas feedstock costs for the US names.

The YTD returns for the broader group of 32 asset lines still show good overall numbers at 22-10 given the great start to the year for many. That still leaves 6 of 7 bond ETFs in the red on the adverse UST shift. The long duration UST 20+Y ETF (TLT) was 1 of the 4 bond ETFs in the bottom quartile along with IG Corporates (LQD), the Aggregate bond index (AGG), and the UST index (GOVT). The BDC ETF (BIZD) is still feeling the YTD weight of the bad “private credit” headlines and fears around quality of the deal flow in what is a space that grew too quickly for quality comfort.

The biggest winners rode the Iran effects on oil and gas with E&P (XOP) and Energy (XLE) far ahead of the other top quartile names with the Midstream ETF (AMLP) at #4. We see the Tech ETF (XLK) and Health Care (XLV) rounding out the top 5.

The “year of AI” has generated some big return moves (both high and low) as detailed in the YTD return for the Tech Check list above. We have detailed the dramatic moves along the way with the semiconductor and AI ecosystem numbers still defying adjectives YTD even after the recent pain. Dell at +258.8% leaves a lot of room for a week like this past one at almost -23% for Dell. For the YTD list, it took just under a 36% return (Taiwan Semi) to make the top quartile. It took 143.5% (Intel) to make the top 4.

The bottom quartile has continued to be dominated by the software and SaaS-based names that were slammed in the AI displacement wave (“SaaS-pocalypse”). The usual suspects dominate the bottom quartile. We also see the Communication Services ETF (XLC), Tesla (TSLA), and IBM in the bottom tier. Oracle is in 2^nd to last.

The LTM returns at 22-10 show the slow and steady increase in the number of negative LTM returns from a low single-digit asset count to double digit in recent months. The list was 31-1 at the end of June with only the BDC ETF (BIZD) in the red at that point at -13.5%. BIZD has now improved to only being down -2.5%. We see 4 of the 7 bond ETFs in the red for the LTM period. We see positive returns for the short duration 1-3Y UST ETF (SHY), HY (HYG), and EM Sovereign Bond ETF (EMB).

See also:

Weekly Returns: Benchmarks and ETFs 10-18-26

Weekly Asset Returns: Tech Check 10-18-26

Weekly UST Deltas: Bear Macro but Bull UST Move 10-18-26

UST Curves and Cycles: Today in Historical Context 10-18-26

Industrial Production Sept 2026: Capacity Utilization 10-17-26

CPI Sept 2026: Does Chronic Inflation Need More Treatment 10-15-26

Macro Crosscurrents Rattle the UST Curve and Equity Valuations 10-15-26

Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26

Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26

The weekly returns across the broader group of 32 benchmarks and ETFs we follow show a net favorable score of 18 positive and 14 in negative range. We see all 4 of the broad benchmarks (NASDAQ, S&P 500, Russell 2000, and Midcaps) in the red with only the Midcaps (MDY) making it out of the bottom quartile and into the bottom of the 3^rd quartile.

The bottom 3 of the 32 asset lines were all tech focused with the Tech ETF (XLK) in last place, 2^nd to last held by the Equal Weight NASDAQ 100 ETF (QQEW) and NASDAQ in 3^rd to last. The small cap Russell 2000 was in the red and landed in 4^th to last with the S&P 500 a few notches higher in rankings in the bottom tier. We also see the fuel-exposed Transports (XTN) in the bottom tier.

The S&P 500 saw 7 of its 11 sectors in positive return range. Despite that relative mix of positive vs. negative by count, the S&P 500 was in the red based on the materially negative performance of its #1 sector, Information Tech, at -6.4% (38.4% of the index weighting). That was joined in the 4 negative S&P 500 sectors by Communications Services (9.8% of the index), Consumer Discretionary (8.8%), and Industrials (8.0%).

The 7 bond ETFs weighed in at 6 of 7 positive with the long duration 20+Y UST ETF (TLT) in the top quartile on the bull flattener that we addressed separately (see Weekly UST Deltas: Bear Macro but Bull UST Move 10-18-26).

The HY ETF (HYG) was the only bond ETF slightly in the red despite the UST rally on HY spread widening. The HY OAS levels are still well inside the long-term median of HY spreads as some modest spread pressure during the week is showing up with tech weakness and equity volatility.

The winners for the week include beneficiaries of the UST rally and the big move higher in oil. We see the Consumer Staples ETF (XLP) at #1 as a defensive, high quality and dividend-oriented sector. We also see Energy (XLE) and E&P (XOP) riding more good news for global oil prices with WTI and Brent materially higher on the week. WTI hit $101 by Friday.

The defensive and the pharma-heavy Health Care ETF (XLV) and Materials ETF (XLB) rounded out the top 5. The chemicals heavy Materials ETF will benefit from Hormuz shipment disruptions given the natural-gas-based feedstock advantages of US-based petrochemical producers. The naphtha-based producers will need to raise prices, and the US players can ride that price trend with their intrinsic cost advantage.

The chart details the weekly price returns of the Tech Check mix we monitor across 32 benchmarks, ETFs, and single names. It was certainly an ugly week with a 7-25 positive vs. negative score. We see 7 of the 8 asset lines in the bottom quartile posting double-digit negative returns.

The pain was pronounced for the AI ecosystem names with Dell at -22.9% in dead last. Applied Materials (AMAT), as a proxy for semi capex, was 2^nd to last at -19.3%. AI plays or semis comprised the bottom 6 of the low quartile in bottom up order from AMAT including Micron (MU), Intel (INTC), Advanced Micro (AMD), and the Semiconductor ETF (SOXX). Software names Palantir (PLRT) and Oracle (ORCL) are at the top of the bottom tier. ORCL is 2^nd to last YTD at -34.2%.

The winners on the week included 5 of the software and SaaS-based services names with Intuit (INTU) at #1 for the week for a name that has consistently been the worst YTD loser in last place. INTU remains on the bottom YTD at -50.9%.

Salesforce (CRM) was at #2 on the week followed by FactSet (FDS), IBM, and Apple (AAPL) rounding out the top 5. Adobe (ADBE) also climbed into the top tier for the week despite being another YTD bottom dweller at -29.9% in 2^nd to last. ServiceNow (NOW) was the last of the top tier for the week in positive range at 1.2%. NOW is in the red YTD in the bottom tier at -7.3%.

In a sign of a bad week, a negative return asset line rounded out the top quartile with the Communications Services ETF (XLC) at -0.5%. Most of the tech check names will need to make their case on earnings calls ahead as investors go hunting for value.

The chart updates the Friday-to-Friday UST deltas in a week that saw a WTI spike and worrisome inflation numbers that nonetheless delivered a bull flattener. That UST rally from 2Y to 30Y came despite unfavorable CPI and PPI releases ( CPI Sept 2026: Does Chronic Inflation Need More Treatment 10-15-26, Macro Crosscurrents Rattle the UST Curve and Equity Valuations 10-15-26).

The lower rates also came with major escalations in the Mideast that took WTI $10 higher to around $101 per bbl by Friday in a move that would typically wag the long end to move higher. Map that move against steep selloffs across the “hot sectors” of tech and the AI exposures, and the plot thickens. The markets saw volatility rising and VIX pushing above 20, in turn generating rumors of hedge fund blowups.

The FedWatch scorecard has calmed down on FOMC risk. The odds of an October tightening to 400-425 bps is down to 17.2% as we go to print vs. 57.6% 1 month ago. The odds of a December 400-425 bps range are now 75.7%. The probability of 425-450 range in December is down to 15.3% from over 44% one month ago.

Credit market concerns are starting to make the headlines with a record amount of AI related securities (direct and indirect) for the OTC markets to deal with for those who seek secondary liquidity. High counterparty risk exposure as broadly defined including collateral concentrations will attract regulatory attention for reserve adequacy in the lender base.

Whenever the patterns move sharply and deviate from recent history (e.g. UST moving lower in the face of materially higher oil and bad news on inflation), the risk of leveraged bets going bad can set off reverberating effects and rumors (the hedge fund blowups, etc.). The coming weeks will be seeing more market risk topics making news.

UST Curves and Cycles: Today in Historical Context

We put the current UST curve in the context of some cyclical histories and ask some questions.

The above chart updates a targeted history of UST curves in place around some critical turning points - whether in economic cycles or monetary policy pivots (or need for a major decision).

I include two boxes with the yield curve details since the curves get a bit crowded in the short to intermediate maturity buckets in the new millennium. The late 1970s, early 1980s, and the late 80s certainly stand apart from the group (visually above and in my personal memory banks).

I line the UST curves up in the boxes in chronological order. The current UST curve we posted (10-16-26) can be framed against those days. Dec 2000 marked what was a tech bubble set to burst (March 2000 NASDAQ peak) and a HY bond default cycle getting underway. Enron (late fall 2001) and Worldcom (summer 2002) were coming down the pike and would add a lot of drama – from the DOJ to the legislative process (e.g. Sarbanes-Oxley in 2002) as well as the capital markets regulatory agenda (what I would call “research lockdowns”).

Looking at the curves on these dates vs. Friday’s close (10-16-26) is just a mental gymnastics drill. I tend to look at UST curves as “more symptom than cause” across economic cycles, but the curve can be a cause for banks and housing via cost of capital challenges. Rate tension flows into bank interest margins as well as asset quality. Rates obviously flow into the corporate borrower level (notably for the highly leveraged floating rate exposed or refinancing schedule heavy) and impact demand in risky asset funding. That will remain a hot topic in private credit today.

Housing and the multiplier effects of homebuilding along supplier chains certainly feel the power of interest rates directly via working capital cycles and new home sales turnover and total volumes. Existing home sales feel it as well as mortgage refi barriers and “golden handcuffs” constrain those with low mortgage coupons on their home. Housing volumes (new or existing) ring a lot of cash registers from suppliers to retail to a range of services including lending, RMBS underwriting, and insurance.

To be clear, the Fed and the curve are always a cost issue. Industry dynamics of course add a lot more to the story. The chart shows that current “high rates” are in substance not really that high in historical terms (Volcker 20% fed funds anyone?). Such rates as today are still seen as a shock relative to 1% fed funds in 2004, ZIRP from late 2008 to Dec 2015, and ZIRP again during COVID from March 2020 to March 2022.

In the timeline, we see a lot of 5% or near 5% 10Y UST yields including 5.1% in Dec 2000 when the tech bubble was a worry. A notable exception among those detailed is the 9-16-24 curve which appeared late in the Biden term. That was when the FOMC was about to go into easing mode. At this juncture, PCE growth was solid and unemployment low. We cover that period in earlier commentaries. That UST curve sits on the bottom of the comps presented in this chart (see Footnotes & Flashbacks: Credit Markets 9-16-24, Footnotes & Flashbacks: Credit Markets 9-23-24.)

Some lookbacks at the key dates posted…

• December 2000 offers a reminder of what came ahead of the Greenspan easing frenzy of 2001 (Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22). He took similar actions to bolster the banks against crises in the early 1990s when commercial real estate was a material threat to large, medium and small banks. If AI unravels, Team Warsh will have their legitimate excuse to follow that history.

• The December 2006 date can be seen as the peak year for the residential mortgage excess and mortgage refi wave (125% LTV refinancings, etc.) and the home stretch (stench?) of the housing bubble. The subprime RMBS and outsized counterparty risk and leveraged derivative threat were not accurately disclosed or measured.

  The HY bond credit cycle peak came in June 2007, and the bank system crisis made the HY default threat that much worse on refinancing risk. HY outflows and punitive market-making in HY also fueled market dislocations at the securities firms and securities units of the large banks. Soon all those securities firms would get rolled up under Bank Holding Companies or become BHCs themselves (Goldman, Morgan Stanley).

• The Oct 2023 curve marks the peak for 30Y mortgages and a high for the 10Y UST on 10-19-26 when the 10Y closed just under 5.0% after hitting that level intra-day. The 30Y Freddie mortgage rate was 7.63% at the peak with a range of other mortgage surveys around 8%. Current Freddie rates are 7.4%.

  The UST yield curve threat to mortgage rates today is clear since Oct 2023 posted lower UST 10Y UST yields than we see today even after last week’s curve rally. That is no small risk for current mortgages subject to where inflation heads from here (see Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26).

Among the questions from here…

There are always a lot of questions and variables to consider across every cycle, but this current one is trickier than most with “AI bubble” debates; a Mideast war; tariff excess and potential escalation of trade wars; commodity and energy price spikes; and high and/more stubborn inflation.

A volatile (euphemism of the week) President who rejects elections and who is apparently devoid of a basic understanding of economics (“selling country pays the tariff” Huh?) further complicates common sense handicapping.

A few obvious questions:

Will the FOMC deliver one more tightening from here in Dec and send the 3M higher? Will the FOMC move even higher into 2027 and push the 3M and 2Y higher again? Does that drive a bear flattening that does more damage to heavily leveraged borrowers?

With inflation metrics (both CPI and PPI) going the wrong way this week and WTI up another $10 this past week and refined products still in severe supply-demand imbalances, does the long end stay range-bound or do we see fresh upward migration or even steepening?

Will inflation ease if the oil markets crack or the demand side faces more second-guessing on growth that hits GDP? Will the AI ecosystem excess in valuations set off equity market dynamics that flow into the UST curve and drive more flight to quality? Then again, does that also set off a credit repricing cycle with spread widening and the economic fallout there from micro to macro?

To the extent the Democrats take the House as the keeper of the budget flame (regardless of the Senate), will Trump accept the election? If Trump rejects the election and goes “full Insurrection Act”, will the GOP sheep in the House and Senate even make a soft bleating sound? If Trump does accept Democracy, will the market start to handicap/discount budget breakdowns and fallout from inevitable clashes and investigations? These are the kind of scenarios where the market will say, “call me when we get there”.

These are the questions that we all will be wrestling with, but the most immediate threat remains energy costs and inflation. Refined product crises continue from gasoline and diesel. Home heating bills in places like Maine and New Hampshire are painful with estimates closer to $2,000 than $1,000 for a typical 275-gallon tank (I grew up on home heating oil in New England). As with tariffs, the policy reactions to diesel prices (Trump hugging Putin on sanctions) can lead to more problems than they solve. That is not going away.

More speculative elements revolve around AI valuation sentiment and market risk. That sends us back to the profile of the Dec 2000 curve above and how the FOMC immediately responded in the aftermath of the capital markets chaos in 2001. We look at numerous curve histories in the links below.

This past week was a painful one for AI and semis that we cover separately. We saw a range of double-digit negative return weeks across many tech names. Dell, which was way ahead in the return rankings, dropped by almost -23% and Applied Materials (AMAT) posted about -19% for the week. Software was also hit hard in AI-exposed names. CoreWeave (CRWV) is not a semi or classic software play, but it generated headlines with a -25% return for the trailing week as an AI driven cloud infrastructure company. It also has people talking about “credit” again.

Elections and Trump…

As noted, the other subjective wildcard (arguably the wildest of the wildcards) is whether Trump accepts election results or goes full-on Mussolini with a dash of those German guys. ICE of course would need to alter their wardrobes (Does brown make me look fat?) and invest in armbands. That type of political and societal shock will not do wonders for consumer spending or investment planning. The international demand for UST would be undermined since it will inevitably make trade policy even more confrontational.

I am old enough to have watched the JFK funeral on TV and very early in life learned about the iconic Ike, FDR, etc. I’ve kept studying history since. “Not normal” does not capture what is going on today. I grew up around WWII and Korean War vets and VFW and Legion barbecues. It is hard to envision what they would think of these events. Most all of them are dead of course. This current election and White House rhetoric defies US history and has more European flavor from the 1920s and early 1930s.

See also:

Industrial Production Sept 2026: Capacity Utilization 10-17-26

CPI Sept 2026: Does Chronic Inflation Need More Treatment 10-15-26

Macro Crosscurrents Rattle the UST Curve and Equity Valuations 10-15-26

Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26

Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

UST Curve History: Credit Cycle Peaks 10-12-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

UST Curves: Slope Matters 10-25-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Wild Transition Year: The Chaos of 2007 11-01-22

UST Slope Update: Some New Inversion Highs 12-8-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: 1988-1989 Credit Cycle Swoon 10-20-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

• The PPI pressures signal more trouble even as the combination of CPI and PPI news saw the UST curve lower with the 10Y UST now under 5.1% as we go to print. The FedWatch odds of tightening by the Dec FOMC meeting to 400-425 bps are now at 63.6%. The odds for the Oct meeting are 29.3%.

• Equity pain in tech can be one factor in a flight to quality moving UST, but the potential is there for investors to factor in how slow growth could start to spill into fixed investment expectations as well as consumer resilience. Both have proven very resilient to this point. The assumption needle can move.

• The higher YoY “Final demand” PPI inflation cuts across both goods and services with Total Final Demand PPI at +6.3%, Final Demand Goods at +9.8%, and Final Demand Services at 4.9% with all three higher than August YoY.

• Intermediate goods and services PPI are also going the wrong way, so it gets tougher to spin the virtue of tariffs, war and the value of scaling back low cost sourcing alternatives. Then again, White House policy makers can just shout louder and use adjectives.

Reading the PPI release is like going to the gym. It is a good idea even when you want to skip it given the strain. There are a lot of tables and small fonts. The September 2026 PPI release was more interesting than usual with the backdrop of the UST curve lower, stocks weaker in recent days, and that price action coming at the same time as inflation is rising, deficits ballooning, and AI ecosystem and broader tech valuations are facing some second guessing.

The chart details the PPI headline final demand from Nov 2010 through Sept 2026. The trend line tells its own story with PPI today posting 6.3% or triple the median from 2010 when the market was in the middle of Obama’s first administration.

Back in 2010, ZIRP was the Fed monetary policy that continued through Dec 2015. That came after the markets came out of the worst of the financial crisis period in 2009. As the rebound continued off the June 2009 lows, PPI hit 4.5% in Sept 2011 as the sovereign crisis also was cresting. We then saw another small peak in July 2018 at 3.4% before the post-COVID inflation wave into the 2022 peak.

For Sept 2026, the “worst since 2022” headlines for PPI today tell the story.

The above table updates some key PPI lines for Sept 2026. The trend is virtually all bad. PPI for YoY “Final demand total” ticked up to 6.3% from 5.4% in August. “Final demand goods” (29% of PPI index) YoY rose to 9.8% from 7.7% last month. “Final demand services” (68.3% of PPI index) moved to 4.9% from 4.5% in August. “Final demand energy” rose to 35.4% from 24.4%. That is ugly (and it sure is not Zelensky’s fault). We also highlight a few intermediate demand headline indicators at the bottom of the chart, and that is also bad news.

The sequential MoM moves is a “follow the bouncing ball” and scan exercise, and the ball is clearly bouncing the wrong way in Sept from August. Both “Final demand goods” and “Final demand services” show material increases. Energy is another notable MoM pain point, moving from 4.5% to 10.8%. “Final demand core” posted a MoM move from 0.2% to 0.7%

Overall, if you see PPI as a leading indicator, macro pressure remains high on inflation and/or on costs (and thus margins). Pricing power is an industry-by-industry and goods vs. services drill down exercise. As 3Q26 earnings keep rolling out, the market will hear updates on the various cost pressures from tariffs to energy and materials.

• After a rough September, the week posted up constructive numbers with the UST calming down for now in what has been a bad period for fixed income allocation.

• The FOMC anxiety and inflation risks have tamed somewhat, but the election “behavior” worries and Iran escalation scenarios still lurk ahead with AI valuation second-guessing among the 3 ugliest worries.

• With CPI and PPI ahead and oil at least in a more stable range for now, the expectation of a favorable earnings season will require something unusual to rattle the constructive market mindset. Unfortunately, we live in unusual times.

The week eased back on UST pressure by Friday, but the running 1-month and 3-month fixed income results remain in the all-negative range for the benchmarks above with 3 of 4 negative for YTD. Only HY edges into a slightly positive sub-1% range. For the trailing year, the best performer was HY at only +1.9% despite higher coupons and shorter duration. The timeline has been unpleasant for bond returns after the inflation pressure, FOMC actions and UST migration took bonds for a ride.

Equity returns remain decidedly mixed over various timelines from large caps to small caps and from growth to value. The S&P 500 and NASDAQ present very solid YTD numbers, but the narrower Dow and the Russell 2000 have been more erratic. The Russell 2000 is an important index for breadth and that has posted negative 1-month and 3-month numbers while still generating impressive YTD numbers and over the trailing year.

The tech bellwethers were mixed this past week with semis under pressure and software and SaaS in rally mode as we cover in other charts. We see the Semiconductor ETF (SOXX) on the bottom at -5.0% with the Software ETF (IGV) at #2 with +3.9% behind Amazon at #1 with +4.34%. For the YTD period, SOXX is +86.1% vs. IGV at +6.6% for a return differential of 79.5%.

For the Mag 7 this week, we see 5 positive and 2 negative (NVDA, META). Only Tesla (TSLA) is negative YTD with Apple (AAPL) in the YTD lead at +24.17% just ahead of NVDA at +23.2%. We see 6 of Mag 7 names positive YTD with only META among those 6 in single digits YTD at +9.1%.

We already looked at the weekly returns for the broader group of 32 benchmarks and ETFs (see Weekly Returns: Benchmarks and ETFs 10-11-26). The score of 24-8 tells the story with a broad range of positive returns.

We saw some UST curve relief that supported bond ETFs this week (see Weekly UST Deltas: Moving Parts 10-10-26). The constructive finish on the week for longer UST also offered some support for higher quality dividends stocks. Mortgage rates remained under a dark cloud, however, with Freddie Mac mortgages moving higher to 7.4%.

We already posted a commentary on the weekly Tech Check returns (see Weekly Asset Returns: Tech Check 10-11-26). The score of 19-13 did not match up to the 24-8 for the broader multi-industry collection as semiconductors posted up poor numbers with a heavy weighting in negative range in the bottom quartile.

The trailing month offers a grim score of 8-24 once again with tech leading the winners. For the winners, the Tech ETF (XLK) is at #1 ahead of NASDAQ at #2, and the Equal Weight NASDAQ 100 ETF (QQEW) at #3.

We see an eclectic mix on the bottom with Midstream Energy (AMLP) in last place with a brutal month but still good YTD numbers in the top quartile and high 2^nd quartile over 3 months. Regional banks and metals/commodities join private credit (BIZD) and duration (TLT) in the dog house.

The tech check list has shown its share of wild swings across the semiconductor and software/SaaS peer group during recent weeks and months. The trailing 1-month shows the Mag 7 names at least all in positive range with META and MSFT in the top quartile. The rankings show a more blended mix in the top quartile across software, semis and AI plays. The Software ETF (IGV) is in the top quartile at +10.7% with the Semi ETF (SOXX) down in the 2^nd quartile at +5.2%. For the month, IGV was joined by PLTR and MSFT in the top tier.

There was still material pain for software bellwethers for the 1-month period with Oracle (ORCL) in last place by a meaningful gap from Salesforce (CRM) in 2^nd to last. Adobe (ADBE) was in the bottom tier also joined by Intuit (INTU), who remains by far the worst YTD performer in the Tech Check mix at -54.3%.

The 3-month return score for the broader group of 32 was 15-17 with the balance of macro numbers and corporate earnings offering support in 2Q26 earnings season and GDP prospects. After a very rough start to the year, the consumer sector appears back in the game while the fixed investment boom rolls on (see GDP 2Q26: Bullish Final Revisions 9-30-26, Macro Dance-Off: PCE Growth vs. Fixed Investment 10-1-26). We get our first advance estimate on 3Q26 GDP numbers this coming week.

The broader mix of 32 asset lines posts a YTD return score of 22-10 with 5 of the 10 negative lines being bond ETFs. We see the long duration 20+Y UST ETF (TLT) in last place with the Homebuilder (XHB) in 2^nd to last while the BDC ETF (BIZD) is 3 off the bottom.

The Communications Services ETF (XLC) and the struggling Consumer Discretionary ETF (XLY) have been highlighted regularly. For XLC, names such as TMUS, T, AppLovin, and Take-Two Interactive have been a drag. The Consumer ETF (XLY) has a wide range of weak performers such as Tesla, McDonald’s, Lowe’s, Home Depot, Booking Holdings, and TJX among others.

The Tech Check YTD returns are still dominated by the extraordinary, outsized returns from the semiconductor and AI infrastructure beneficiaries with a range of major software names struggling in the score of 23-9.

We see 4 asset lines in triple digits from Intel (INTC) at +183.7% at #4 up to Dell at +365.6%. Applied Materials (AMAT) just missed the 100% line at +97.3%. We see the SaaS-pocalypse victims on the right along with some bellwether software companies such as Oracle in what has been a recurring YTD theme for software. Recent value seeking has driven some rebounds.

The LTM returns at 23-9 show the slow and steady increase in the number of negative LTM returns from low single-digit asset lines in recent months. The list was 31-1 at the end of June with only the BDC ETF (BIZD) in the red at that point at -13.5%. BIZD has now improved to only being down -0.24%. We see 5 bond ETFs in the red for the LTM period with the short duration 1-3Y UST ETF (SHY) and EM Sovereign Bond ETF (EMB) slightly positive.

The chart details the weekly price returns of the Tech Check mix we monitor across ETFs and single names. Overall, we see a mediocre week with a score of 19-13. The week saw 5 of 7 from the Mag 7 in positive range with Meta (META) and NVIDIA (NVDA) in negative range at the bottom of the 3^rd quartile. Both underperformed the broader NASDAQ and S&P 500. Apple (AAPL) posted positive returns but also underperformed the S&P 500.

It was a favorable week for the software and SaaS names in relative terms after a very tough and volatile YTD period. We see the Software ETF (IGV) in the top quartile at +3.91% or almost 9 points ahead of the Semiconductor ETF (SOXX) at -5.01% in the bottom quartile.

The single name semis struggled this week. That is evident in the bottom quartile with Intel (INTC) in dead last at -12.26% in a quartile that shows 7 of 8 names directly or indirectly tied to semiconductor operations. Applied Materials (AMAT) is a semiconductor equipment manufacturer and correlated with the global capex cycle. Salesforce (CRM) was the lone software operator as the lead name in the bottom quartile. CRM remains in negative return range YTD in the bottom quartile

The big winners this week included Palantir (PLTR) on a series of bullish street upgrades and revisions. PLTR has been rebounding from some earlier steep selloffs and is in the middle of the 2^nd quartile YTD among the tech check names. Many of the software bellwethers remain in negative range YTD as we cover separately.

Among the weekly leaders, we see more rebounds with 5 of the 8 names in the top quartile from software and SaaS peers. Those 5 join Cisco (CSCO), Amazon (AMZN) and Dell (DELL) in the top tier for the week.

FactSet (FDS) took the #2 slot behind PLTR at just under +8% with Intuit (INTU) ranked at #3 with +7.7%. INTU remains dead last YTD at -54.3%. FDS is slightly negative YTD at -1.0% YTD and has edged into the bottom of the 3^rd quartile. Rounding out the top 5 is bellwether Cisco (CSCO) followed by ServiceNow (NOW). It took 4.8% to make the top 5 this week.

The weekly returns across the broader group of 32 benchmarks and ETFs show a favorable score of 24 positive returns and only 8 in negative range, but the next layer of the return profiles are mixed. The 4 major benchmarks did not make the top quartile with the S&P 500 and NASDAQ in the 2^nd quartile, the Midcaps (MDY) at the bottom of the 3^rd quartile, and the small cap Russell 2000 in the bottom quartile. That said, the S&P 500 showed 9 of its 11 sectors in positive range. The Equal Weight S&P 500 ETF (RSP) was also in the 2^nd quartile.

We see some of the quality dividend stocks up near the top as long UST rates edged lower. The curve supported the 7 bond ETFs in positive range (see Weekly UST Deltas: Moving Parts 10-10-26). Despite the UST curve ending on a positive note, the mortgage story keeps getting worse with Freddie ending the week at 7.4%.

As we cover in other commentaries, the current 10Y UST is higher than when mortgage rates saw the 7.63% Freddie rate back in Oct 2023. That does not bode well for housing. The fall of 2023 saw Freddie hit highs and a broader mix of mortgages were near 8% in numerous mortgage surveys (see Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26).

This past week, the Homebuilder ETF (XHB) finished in 2^nd to last in the bottom quartile, and that offers another reminder on housing pressures as we await the Sept quarter earnings reports and guidance from homebuilders.

The winners this week included the dividend-heavy Utility ETF (XLU) and Consumer Staples ETF (XLP). The Energy ETF (XLE) and E&P (XOP) landed in the top 5. Those two are in the top 2 rankings YTD as well. Interestingly, the more dividend-driven Midstream ETF (AMLP) with its 7.7% dividend yield was “down at the top of the bottom” quartile this week (say that 10x quickly). Real Estate (XLRE) and Financials (XLF) also made the top quartile this week.

The week ahead will kick off earnings season for major banks and financials followed in the coming days by a long tail of Regional Bank ETF (KRE) constituents. We get the Taiwan Semi (TSM) earnings report this week. TSM is in the bottom quartile of our “Tech Check” return list this week and in the top quartile YTD. We will cover the tech mix in a separate commentary.

The chart updates the weekly UST yield curve deltas in what was a modestly positive week for duration despite the series of “highest since” headlines around 10Y and 30Y UST yields as the week unfolded. The10Y moved north to the 5.35% area before settling in at 5.24% as we go to print. As we will cover in separate commentaries, the 7 bond ETFs we monitor were all positive on the week.

With the FOMC minutes more benign than feared, the markets will await CPI and PPI this week for a fresh set of data at the headline level, core, and in key product segments near and dear to many households.

Mortgage rates saw the Freddie benchmark move to 7.4% while the more diverse and timely Mortgage News Daily survey ended the week at 7.48% after recently hovering near 7.6%. For some context, the move by Freddie to 7.4% is up from 7.28% the prior week and 6.3% YoY. The Freddie move to 7.4% is notable since the 10Y UST today is above where it was back during the cyclical peak in the Freddie rate in Oct 2023, when Freddie reached 7.63% with a 10Y UST just under 5% (see Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26). That leaves current mortgage rates exposed.

With the FOMC meeting this month, recent inputs have sent the odds of a tightening plunging at CME FedWatch to only 17.7% and one hike by the December meeting at 67.6%. Oil in the US (WTI) saw price action milder this week despite the usual toxic geopolitical headlines. The “annihilation, etc.” threats have dulled market senses (“call me when the mushroom cloud arrives”). That said, Iran is not backing down, and there is no easy offramp outside of common sense, which never outweighs Trump’s ego.

This week will see PPI and CPI, but we will also get releases on Existing Home Sales and Industrial Production. We can get a sense of how stalled housing sales volume remains with even more pressure on the “golden handcuff” mortgage refinancing barriers. We get a fresh read on the working capital cycles and how rising costs from tariffs, energy, materials and freight/logistics are flowing into pricing, costs, or tariff mitigation strategies. A major earnings wave arrives.

Inflation as a recurring price factor is just one aspect of the challenge in addition to inflation well above target (see CPI Aug 2026: Staying Stubborn, Not Accelerating 9-11-26, PPI August 2026: Leading Indicator Signaling Struggling 9-10-26) There is the “household basket” affordability issue that includes the one-time increases and the slow lag effects of tariff cost pressures. Those elements will get more visibility during 3Q26 earnings season as the myriad parts of costs (notably tariffs, energy, materials, freight) get balanced into a margin performance and outlook.

• The week was not pretty, and the 1-month period posted a score of 4 asset lines with positive returns and 28 in negative range across our usual sample group of 32 benchmarks and ETFs.

• Tech unsurprisingly has been the resilient asset grouping while the energy outperformance was serving as a pain point for bonds and drove cost pressures for too many other sectors.

• For the YTD period, 6 of 7 bond ETFs are in the red while energy related ETFs take 3 of the top 4 slots.

The above table breaks out the debt and equity benchmarks we monitor with related time horizon returns.

We see all 4 fixed income benchmarks in negative range for 1-month and 3-month horizons and 3 of 4 YTD with HY positive but only at +0.14%. Looking back over the 1-year timeline, we see 2 fixed income benchmarks in positive range but only at +1.34% for the best performer with HY.

Equities posted a decidedly mixed trailing 1-month period with tech and growth posting positive numbers for NASDAQ and Russell 3000 growth. The Russell 2000, Russell 3000 value, and the Dow were in negative range for the month. The S&P 500, with its tech-heavy mix, managed to eke out a small positive return at +0.84%.

The tech bellwethers were mixed in what was generally a good week more broadly for tech with the Semiconductor ETF (SOXX) and Software ETF (IGV) north of 2%. We see only 3 of the Mag 7 in positive range on the week with 4 negative including Meta and Apple sitting on the bottom.

Oracle (ORCL) remains the worst of the single names on the list YTD at -26.3% while Taiwan Semi (TSM) was the winner at +56.8%. We look at the broader list of single names in charts further below where Micron (MU) wins the YTD clash of the semis with Dell the leader of the broad mix of AI ecosystem names.

We already addressed the 1-week asset returns in a separate commentary (see Weekly Returns: Benchmarks and ETFs 10-3-26). There is no getting around the fact that it was another bad week with a score of 8-24 positive vs. negative.

The UST curve was moving the wrong way after a very brief intraday rally after the payroll numbers before closing at higher yields (see Weekly UST Deltas: Major Moving Parts 10-3-26, Payroll Adds/Declines Sept 2026: Negative Revisions, Weak Payroll 10-2-26). The week saw some more 52-week highs for long-dated UST.

We already posted on the 1-week Tech Check asset list (see Tech Check: Weekly Price Returns 10-3-26). We see a balanced score of 17-15 positive vs. negative returns with a better relative mix in the top quartile from semiconductors and a modestly heavier weighting of software and SaaS-based services names in the bottom quartile.

Micron (MU) posted 4Q26 revenue up almost 5x YoY with 87% gross margins, but MU still sold off on the day and was negative for the week in the bottom of the 3^rd quartile.

September is typically a bad month for equities, but this was especially ugly in the context of all the AI celebrations. We see a score of 4-28 with a heavy tech flavor from the Tech ETF (XLK) joined by the NASDAQ and Equal Weight NASDAQ 100 (QQEW) in the top 3. The tech-heavy S&P 500 was only slightly positive at +0.84%.

In the bottom quartile, we see a heavy weighting of interest rate sensitive and dividend heavy asset lines. All 7 bond ETFs were in the red with the long duration 20+Y UST ETF (TLT) in the bottom quartile.

The 1-month Tech Check returns showed the semiconductors and AI ecosystem plays with a dominant weighting in the top quartile. That included the Semi ETF (SOXX). Meta also broke into the top tier lineup for the month on the Muse headlines.

The bottom tier once again was heavy on software and SaaS with Intuit (INTU) on the bottom joined by Adobe (ADBE), FactSet (FDS), and Salesforce (CRM).

The 3-month returns for the broader asset mix group weighs in at 12-20 for positive vs. negative. Energy related ETFs post 3 in the top quartile with E&P (XOP) at #1 and the broader Energy ETF (XLE) at #2 with Midstream at the bottom of the top quartile. The top tier includes the Tech ETF (XLK) at #3, NASDAQ at #4, Base Metals (DBB) at #5, and the Equal Weight NASDAQ 100 (QQEW) at #6 with the tech-heavy S&P 500 rounding out the top quartile lineup.

The DBB performance was one more factor feeding the raw material cost pressures that will have to find its way into pricing somewhere along the chain – even if just in part. Some of the non-energy price pressures on various chemicals and base metals are also tied into the Hormuz disruptions.

The YTD score for the broader group of 32 presents a mix much like the 3-month horizon with energy and tech leading the way. Energy exposure makes up 3 of the top 4 with Tech (XLK) at #3 mixed in with E&P (XOP) at #1, Energy (XLE) at #2 and Midstream (AMLP) at #4.

We see tech-heavy NASDAQ in the top quartile with the Equal Weight NASDAQ 100 ETF (QQEW). The small cap Russell 2000 made the top quartile after a very strong start but faded over the past few months.

Interest-rate-exposed ETFs are heavy in the bottom quartile with the long duration 20+Y UST ETF (TLT) in dead last and 2 other longer duration ETFs in the bottom tier.

The BDC ETF (BIZD) has had its share of headline problems on redemption requirement headlines outside the BDCs in private credit holdings. Despite that overhang, BDCs have been mounting a mild comeback as quarterly earnings push back on the more dire scenarios.

Consumer Discretionary ETF (XLY) remains a problem and is sitting in second to last at -7.28%. XLY had a slew of names with material underperformance YTD (Tesla, McDonald’s, Lowe’s, DoorDash, Booking Holdings, TJX, etc.). While PCE has held in well with the latest round of data, the consumer and “K recovery” themes will remain in the front burner.

The Tech Check asset lines YTD are in line with where the subsectors have been aligned in recent commentaries. The semiconductor names and AI ecosystem bellwethers (Dell, Cisco) were the winners with massive returns while the software and SaaS names have been slammed over in the bottom quartile with 6 of 8 from that group joined by Tesla and IBM.

The LTM returns at 22-10 show the slow and steady increase in the number of negative LTM returns from single-digit asset lines in the red only a handful of months ago. The list was 31-1 at the end of June with only the BDC ETF (BIZD) in the red at that point at -13.5%. BIZD has now improved to only being down -4.4%. We see 5 bond ETFs in the red for the LTM period.

Mortgage Creep Continues, Curve Shapeshifting Uncertain 10-4-26

Another setback along the UST curve keeps the heat on mortgages.

The chart updates the Freddie Mac benchmark and UST curve comps with recent moves in the 10Y UST potentially pushing mortgages even higher into the danger zone. We looked at some of these histories recently, and the specter of the October 2023 cyclical highs is getting closer to being revisited (see Mortgage Rates vs. UST Curves: Spooky Memories to Ponder 9-20-26).

As we look back, it should be highlighted that the 10Y UST was slightly under 5.0% when the Freddie benchmark hit 7.63% in October 2023 and various other mortgage surveys hovered near 8%. That period also came on the heels of an oil macro shock (as much as Team Trump avoid citing Putin and Ukraine in looking back). The ensuing macro trends showed the US economy continuing to expand into 2024 (2.8% annual GDP growth in 2024 vs. 2.1% in 2025).

The housing sector and affordability barriers tied to monthly payments will make the headwinds worse as we roll into 2027 unless oil does in fact crack and move the long end of the UST lower. The rapid moves higher in mortgages over the past two weeks have driven rates to 7.28% at Freddie and around 7.57% in the Mortgage News Daily survey. That spells more trouble for both new and existing home sales. The signals are aiming higher for mortgages, and that is sure not what the housing market needs at this point.

The differential between the 10Y UST and the Freddie benchmark was 265 bps back at the Oct 2023 peak on the 10Y. Currently, that differential is +200 as shown in the chart with the10Y UST higher now. That in theory makes for bad risk reward symmetry in the absence of a favorable yield curve move.

There is certainly no shortage of ways to spin UST scenarios, and the history is convoluted whether recent history or back in the days of Volcker (when I had a 23% prime based loan). We also saw a slew of 9% handles in early 1989 (see curve history links at the end of this commentary). Yield curve pain is hardly new (see The Curve: Pain and Confusion 9-28-26). The good news is the virtually assured heavy fixed asset investment driven by AI with a currently solid (but uncertain) consumer profile.

The more recent quarterly reports for homebuilders have shown prices and margins under pressure. In this current backdrop, mortgage rates trump the lower average selling prices (see KB Home: 3Q26 Highlights Builder Pressures 9-25-26, see Lennar 3Q26: Metrics Keep Weakening 9-18-26). We get a fresh round of builder earnings ahead for the September quarter earnings releases.

Some UST curve histories:

Business Cycles: The Recession Dating Game 10-10-22

UST Curve History: Credit Cycle Peaks 10-12-22

Bear Flattener: Today vs. 1994 and Aftermath 10-18-22

Fed Funds, CPI, and the Stairway to Where? 10-20-22

Greenspan’s First Cyclical Ride: 1987-1992 10-24-22

UST Curves: Slope Matters 10-25-22

Greenspan’s Last Hurrah: His Wild Finish Before the Crisis 10-30-22

Wild Transition Year: The Chaos of 2007 11-01-22

UST Slope Update: Some New Inversion Highs 12-8-22

Yield Curve Lookbacks: UST Shifts at Cyclical Turns 10-16-23

UST Moves 1978-1982: The Inflation and Stagflation Years 10-18-23

UST Moves: 1988-1989 Credit Cycle Swoon 10-20-23

UST Moves: The 1990-1991 Risk Factor Pig Pile 10-24-23

The past week saw another poor performance at an 8-24 positive-negative score with tech once again the better story line. NASDAQ made the top quartile, but the S&P 500 was negative and in the 2nd quartile just behind the Russell 2000. Midcaps (MDY) were slightly positive and ranked ahead of the other broad benchmarks. The large caps to small caps return range was narrow from MDY at +0.57% down to -0.25% on the S&P 500. The S&P 500 saw 8 of its 11 sectors in negative range but with the largest sector – Tech – posting a positive return.

The past week was heavily about major moves in the FOMC hike odds and what the payroll signals meant for inflation worries and the timing of hikes and notably the risks of a potential October hike. The payroll numbers ended up being extremely weak at +29K with -60K of negative revisions for Aug and July (see Payroll Adds/Declines Sept 2026: Negative Revisions, Weak Payroll 10-2-26).

The UST immediately rallied after the jobs release but still closed higher on the day by 4 bps on the 10Y UST at 5.27% after an intraday low of 5.16%. We thus see negative returns for the week on 6 of 7 bond ETFs with the lone exception of the short duration UST 1-3K ETF (SHY).

The PCE inflation news offered the “absence of bad news,” but the mix remains well above target PCE inflation. The main PCE price lines were generally moving sideways after adjusting for a lot of restatements (see PCE August 2026: Income & Outlays Show Firm Demand 10-1-26).

FedWatch odds of a move by the FOMC to 400-425 fed funds in October now stand at 22.1%, down from 64.2% 1 week ago. For the December 2025 FOMC meeting, the odds of FOMC action moving to 425-450 (2 hikes) are now down to 17.9% from 51.0% a week ago.

Notable winners in the rankings included Transports (XTN) at #1 with constructive GDP updates and PCE outlay numbers supportive along with some very limited policy progress on managing diesel imbalances.

Energy ETFs held in with E&P (XOP) and Energy (XLE) in the top 5 on some more noise about escalation risks (3^rd carrier, more troops, etc.) even if with minimal impact on oil prices this week. WTI was essentially sideways from Friday to Friday. The Tech ETF (XLK) was #3. We look at the Tech Check mix in a separate note, and that group posted a more favorable symmetry in returns.

The biggest losers include the Base Metals ETF (DBB) at -4.0% as the strong commodity cycle gets second-guessed and the market awaits reporting season and guidance. For the UST curve, duration remains in the crosshairs with the long duration 20+ UST ETF (TLT) in the bottom quartile with weaker returns across dividend-heavy Real Estate (XLRE) and Consumer Staples (XLP).

The past week saw a radically overhauled handicapping of the market odds on the timing of FOMC tightening. In broader context, the UST yield curve pressure initially appeared to get some light relief with a weak payroll release. That did not last.

After a very challenged stretch of stubborn inflation, adverse energy market dynamics and an apparent firming of cyclical fundamentals with 2Q26 GDP and PCE outlays, there seemed to be little to push back on UST bears (see Macro Dance-Off: PCE Growth vs. Fixed Investment 10-1-26, GDP 2Q26: Bullish Final Revisions 9-30-26). PCE inflation numbers were not bad, but they remain well above target (see PCE August 2026: Income & Outlays Show Firm Demand 10-1-26).

Payroll numbers brought a very weak reading of +29K (see Payroll Adds/Declines Sept 2026: Negative Revisions, Weak Payroll 10-2-26). The steep negative revisions of -60K for August and July also supported the plunge in FedWatch odds on the potential for an October tightening. That briefly caused some UST curve excitement that soon faded with the 10Y ending higher on the day after a brief rally.

The 2Y UST delta was muted as the odds of an FOMC hike to 400-425 at the October meeting declined to 22.1% per CME FedWatch as we go to print. That was down from 64.2% 1 week ago. For the Dec 2025 FOMC meeting, the odds of a 425-450 level have plunged to 17.9% from 51.0%. The odds of 400-425 by December meeting are now 67.1%.

The wildcard in the forecasts besides CPI and PCE inflation readings is of course Middle East geopolitics. Trump’s recent statements that oil would plunge after the election and that he would bomb Iran (or annihilate Iran) is a challenge to reconcile in tandem when another aircraft carrier and more troops are heading that way. The promise to deliver $5,000 checks also could make the UST supply issue a challenge to ignore and especially if there is also a fresh round of escalation along with it.