Equity–Bond Split: Stocks Rise as Treasuries Hit Worst Week in Eight Months

Market Overview

U.S. economic data last Friday reinforced expectations for a Federal Reserve rate cut next week. Despite uncertainty surrounding next years policy outlook, market sentiment remained upbeat, pushing all three major equity indices higher. The S&P 500 approached its record peak, while both the S&P and Nasdaq logged their fourth consecutive daily gain.

Nvidia slipped 0.5% on the day—though it still gained over 3% for the week—while Tesla rallied nearly 6% for the week. Netflix dropped almost 3% after reports that it agreed to acquire Warner Bros. Chinese ADRs outperformed the broader market, with the sector index rising over 1% and Baidu surging nearly 6%.

Following the release of the PCE inflation data, the U.S. Treasury market faced heavy selling pressure. Yields climbed to a two-week high, with the 10-year Treasury posting its worst weekly performance in nearly eight months. The U.S. Dollar Index turned higher and refreshed its daily peak. Gold prices were volatile—up more than 1% intraday before giving back gains. Cryptocurrencies came under pressure, with Bitcoin falling nearly 5% and breaking below the $89,000 level.

Key Market Watch — Outlook● PCE Inflation at 2.8%, Largely in Line With Expectations

The U.S. PCE Price Index rose 0.3% MoM in September, matching both expectations and the prior reading. On a yearly basis, PCE increased 2.8%, in line with forecasts and slightly above the previous 2.7%.

Core PCE rose 0.2% MoM, also in line with expectations and unchanged from the prior month. Annual core PCE climbed 2.8%, matching Bloomberg‘s survey estimate, slightly below Dow Jones’ 2.9% expectation, and down from the prior 2.9%.

Personal income for September came in above expectations, while personal spending undershot forecasts.

● A “Cautious Rate Cut” Window for the Federal Reserve

Kevin Hassett—Director of the White House National Economic Council and viewed as a leading candidate for the next Federal Reserve Chair—stated that the impact of the government shutdown on the economy has been more negative than expected. However, he expects a stronger rebound in Q1 next year, making now a favorable window for the Fed to deliver another cautious rate cut.

He noted that he has not discussed Fed leadership matters with Donald Trump. Hassett expects a 25-basis-point cut next week.

Events to Watch (GMT+8)

17:30 EU — Eurozone Sentix Investor Confidence (Dec.)

00:00 US — NY Fed 1-Year Inflation Expectations (Nov.)