Bond yields (TNX) keep marching higher, but the stock market is taking it in stride.

Bond Craziness

I keep wondering whether this move in bonds would have happened even without the stronger economy and competition from corporate bonds. Treasuries are in the worst stretch ever, and a 40-year bear market is potentially just getting started.

Stocks Resist the Madness

Broadening Out

Yesterday, the entire market surged as the ten-year yield tickled 5.4%, while Technology (XLK) had a strong session, with some weakness in hardware.

Real Estate (XLRE) was the only sector lower, which makes sense, as it needs yield relief more than other sectors.

Most factors were higher; large-cap growth and quality led the way.

Carnage on Full Display

The iShares Russell 3000 ETF (IWV) is a good session away from a new all-time high, but…

…54% of the Russell 3000 is down more than 20%, in other words, a bear market.

Short Squeeze

There is a monster short position against the iShares Russell 2000 (small caps). It's amazing; the Street loved small-caps coming into the year and was head over heels thrilled until this summer. The spike in yields has changed everything, including what looks like a macabre bet that these names go even lower.

Everyone knows I love short squeeze season – when this one happens, it's going to be shock and awe, but the timing is anyone’s guess.  

Today’s Session

The market will get another solid start as crude oil declines faster.  Diesel is an issue, but it will be resolved as well.

I continue to see the rally broadening out once the S&P 500 closes at a new high – even if it's driven there primarily by AI stocks.

For now, investors are okay with higher yields, especially since they're not a US-centric problem.

Comments

Are current Interest rates a reflection of perceived risk if investing in the United States? Our use of "leverage" has skyrocketed from deficits, SI infrastructure, and investment alternatives. Focus on Debt Reduction is critical in my opinion. Paul K. on 10/6/2026 11:36:05 AM

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