The week in U.S. markets was shaped by two powerful and opposing forces: enthusiasm for artificial intelligence and a sharp bond sell-off. On Monday the S&P 500 rose 1.5%, its best day since early August, lifted by Meta, which jumped 11% on the success of its Muse AI agent, and by lower oil prices on diplomatic signals with Iran; on Tuesday the Nasdaq set a record of 27,244 points. From Wednesday on, however, Treasury yields surged: the 10-year note touched 5.22% on Thursday, its highest level since 2007, with its biggest daily jump since April 2025, while the 30-year bond reached 5.48%, the highest since 2004, amid a global debt sell-off that also pushed Bund and JGB yields to multi-year highs. The 10-year ended the week near 5.2%, its sixth straight weekly increase; 2-year yields also climbed and the VIX rose to 15.7 from 14.8. A $4,078 million Treasury buyback did little to stem the selling in longer-dated debt. Stronger-than-expected economic data only added to the pressure on bonds: the S&P Global flash composite PMI jumped to 58.4 (vs. 55.2 expected), a more than five-year high, with the steepest rise in input costs in four years; initial jobless claims fell to 197,000, near 57-year lows; new home sales rose 6.4% to a 684,000 annualized pace; and core capital goods orders grew 1.6% in August, driven by AI spending. Households, by contrast, remained gloomy: the University of Michigan consumer sentiment index fell to 48.1, a four-month low, with one-year inflation expectations at 4.6%.

At the Fed, Governor Michael Barr said further policy tightening will likely be needed, and New York Fed President John Williams called another hike before year-end reasonable, joining seven officials who backed further tightening; the probability of an October hike rose to 70-75%, from around 50% a week earlier. Freddie Mac’s 30-year mortgage rate topped 7% for the first time in 20 months (7.03%). The dollar index touched 101.4, its highest since late July, and gold slipped to $4,271 per ounce. Oil markets remained volatile: Brent swung between an attack on a vessel in the Strait of Hormuz and U.S.-Iran negotiations, settling near $105.7, while WTI fell roughly 7% on the week to $92.7.