PCE cooled. The 10-year still hit 5.35%

Rundown · 2026-10-01

The Fed's inflation measure cooled and the bond market sold off anyway. Wednesday's core PCE rose 0.2% against 0.3% expected, BEA's annual revision cut the annual rate to 3.0%, and October hike odds fell to about 37% (CME-based reports and Kalshi/Polymarket agree). The long end ignored all of it. The 10-year closed at 5.291% (+4.2bp), then traded as high as 5.347% overnight. MarketWatch calls that the highest since 2002. Brent is back above $100, and French, German and UK yields are at 17-24-year highs. The 2-year is lower (4.893%), so the curve is steepening: the front end is pricing a more patient Fed, and the long end is pricing inflation and supply. Index futures are split. NQ is +0.60% on chip names and YM is -0.12%. Micron beat by a wide margin and has not moved pre-market. ISM manufacturing at 10:00 and four Fed Board members speaking between 10:00 and 15:30 are today's events.

Overnight

Against Wednesday's settles, as of 06:30 ET (delayed, MarketWatch). ES (Dec) 7,733.00, +17.50 (+0.23%) from 7,715.50 · NQ 30,881.50, +182.75 (+0.60%) from 30,698.75 · YM 51,218, -60 (-0.12%) from 51,278 · RTY 2,818.3, +0.8 (+0.03%) from 2,817.5
Wednesday's settles reconcile with Tuesday's. ES -16.50 (-0.21%) · NQ +85.50 (+0.28%) · YM -424 (-0.82%) · RTY -11.7 (-0.41%)
Reference levels, and nothing more. Globex ranges so far: ES 7,705.00-7,767.75 · NQ 30,684.50-31,151.50 · YM 50,936-51,493 · RTY 2,797.9-2,835.2. The NQ high of 31,151.50 is also the contract's 52-week high. ES and NQ are in the middle of their ranges. YM is closer to its low. Claims at 08:30 print into these ranges
Tokyo rallied on Micron. Nikkei 68,956.72, +2,203.00 (+3.30%), led by chip names after Micron's results. Japan's Q3 Tankan had large manufacturers at +24 (+25 expected, +22 prior). The ASX 200 fell 1.99% after Australia's manufacturing PMI dropped to 49.6 from 52.0. Hong Kong and mainland China are closed for the National Day holiday. The Hang Seng and Shanghai figures on most quote pages are Wednesday's
Europe is down, and the move is in bonds. FTSE 100 10,445.50, -1.51% · DAX 25,070.04, -0.51% (both mid-morning, MarketWatch) · STOXX 600 opened about -0.8%. French yields are at their highest since 2002, and German and UK yields are at 17-19-year highs, per Reuters
Iran: the talks are still going, and so are the incidents. Iran says it has received a US counterproposal to its seven-day ceasefire and Hormuz reopening plan, and the cabinet is reviewing it. Late Wednesday, Secretary of State Rubio ordered Foreign Minister Araghchi's delegation out of the US one day early, per CBS. UKMTO reported that three vessels, including a crude tanker and an LNG carrier, were struck by projectiles in the Strait on Tuesday. Trump on Wednesday: "We blow them up or make a deal"

The Dollar & FX

DXY 101.80, +0.35 (+0.34%) from 101.45 (ICE, via MarketWatch), range 101.46-101.85. 101.85 is a new 52-week high, above the 101.80 we flagged on Wednesday. Lower hike odds did not weaken the dollar. Higher long yields and the selloff in European bonds are doing more to support it than the Fed path is doing to weaken it. Investrade printed Wednesday's DXY at 101.37. That is an intraday figure, and the brief uses the ICE close
6E is carrying the move. EUR/USD 1.1292, -0.0039 (-0.34%) from 1.1331. That is below Tuesday's 52-week low of 1.1312, so the pair is at a new low for the year. Europe's own bond selloff, with French yields at a 24-year high, is not supporting the euro
6J is weaker despite a hawkish BOJ. USD/JPY 158.17, +0.76 (+0.48%) from 157.41. The BOJ's Summary of Opinions showed some members open to faster hikes, and the Tankan was close to expectations. Neither supported the yen against a 5.3% US 10-year. The 10-year JGB is at 3.11%, per Reuters
6B is lower. GBP/USD 1.3221, -0.0043 (-0.32%) from 1.3264. Wednesday's gain on the upward revision to UK GDP is gone, and gilts are selling off with the rest of Europe
6A and 6C are flat. AUD/USD 0.6944, unchanged. The weak Australian PMI and the China holiday are offsetting the chip rally. USD/CAD 1.4244, +0.0010 (+0.07%) from 1.4234. Firmer crude is limiting the move higher in USD/CAD
October hike odds: about 36%-38%. AP and Reuters put the CME-implied probability at 37%-38%, down from about 50% before PCE. Prediction markets agree: Kalshi 37.5%, Polymarket 35.5% at 06:34 ET (via DeFi Rate). December is still about 73%. The market moved the hike to December; it did not drop it. Minneapolis' Kashkari said on Wednesday evening that inflation is "still too high at around 3%" and that he expects another hike this year, per InvestingLive

Energy & Metals

CL: November settled $90.42, +$1.04 (+1.16%) on Wednesday. Investrade and MarketWatch agree, and it reconciles with Tuesday's $89.38. It is $91.79, +$1.37 (+1.52%) now, range $88.79-$92.90. December is $89.52, so the Nov-Dec spread is about $2.27, up from about $1.96 on Wednesday morning
Brent: November expired at $103.53 (+$0.94). December, now the front month, settled $98.03, +$1.87 (+1.94%), and it is $100.17, +$2.14 now, range $96.55-$100.83. This is the December contract trading above $100, about $3.40 below where November expired. The roll explains the lower front-month level; the market has not fallen
The mechanism: supply has recovered but the risk has not. CBS puts Gulf exports at about 21.8 million barrels a day, close to the prewar 23.3 million. Wednesday's EIA report showed a crude build of 0.92 million barrels (against a 0.3 million draw expected). Product stocks fell hard: distillates were down 2.25 million barrels, and are 14.9% below a year ago. Crude is rising this morning on the attacks in the Strait and on the expulsion of the Iranian delegation, not on inventories
GC: December settled $4,186.70, +$7.00 (+0.17%) on Wednesday. Investrade and MarketWatch agree, and it reconciles with Tuesday's $4,179.70. It is $4,197.30, +$10.60 (+0.25%) now, range $4,169.40-$4,222.80. Wednesday's pre-market quote of $4,220 did not hold into the settle. Gold is up a little this morning even though the dollar and long yields are both up, which suggests a small haven bid. With real yields this high, it has not become a strong one
Rates. 10-year 5.299%, +0.8bp from Wednesday's 5.291% close (Tullett, via MarketWatch), range 5.273%-5.347%. 2-year 4.893%, -1.5bp from 4.908%, range 4.885%-4.933%. 2s10s is about 41bp, up from about 35bp on Wednesday morning. The 30-year closed at about 5.64%, per AP. The 10-year rose 87bp in Q3, the most in a quarter since 1994, per Reuters

Where We Left Off

Wednesday's RTH close, per AP: Dow 50,906.05 (-443.87, -0.9%) · S&P 500 7,651.54 (-19.30, -0.3%) · Nasdaq Composite 26,861.06 (+63.52, +0.2%) · Russell 2000 2,796.86 (-11.06, -0.4%). All four reconcile with Tuesday's published closes, and MarketWatch matches all four independently. Investrade's Dow and S&P changes were slightly off (-441.13, -18.81), and the brief uses AP. The Nasdaq-100 rose +0.23%. The VIX closed at 16.55
The data was mixed for the Fed. Core PCE and the annual revision were soft. Q2 GDP was revised up to 2.2% from 1.5%, with Q1 revised to 2.5%. ADP was stronger than expected at +90K, and Chicago PMI jumped to 58.8. AP's summary: the economy was "even stronger during the spring than earlier thought", which kept long yields high. The Dow Transports fell 1.37%
What carries over: the front end and the long end are reacting to different things. Soft inflation lowered the odds of an October hike, and strong growth plus a global bond selloff pushed the 10-year higher. Today's ISM and the Fed speakers can move either end of the curve

Yesterday's Data

On The Calendar Today

Time ET · Event · Consensus · Prior · Hits

08:30 · Initial jobless claims, w/e 26 Sep · 200K · 197K · USD · ES

08:30 · Continuing claims, w/e 19 Sep · 1,730K · 1,719K · USD

09:05 · Fed's Barkin, Collins, Schmid · n/a · n/a · USD · GC

09:45 · S&P Global manufacturing PMI final, Sep · 57.0 · 53.9 · USD

10:00 · ISM manufacturing, Sep · 55.0 · 54.6 · USD · ES · GC

10:00 · ISM prices paid, Sep · 72.3 · 71.1 · USD · GC

10:00 · Construction spending, Aug · 0.0% · -0.5% · USD

10:00 · Fed Governor Waller, FRED Con · n/a · n/a · USD · GC

10:30 · EIA natural gas storage · +64 Bcf · +53 Bcf · NG

11:30 · 4-week and 8-week bill auctions · n/a · 3.850% · 3.990% · USD

12:00 · Freddie Mac 30Y mortgage rate · n/a · 7.03% · USD

13:30 · Fed Vice Chair Jefferson, outlook · n/a · n/a · USD · GC · ES

15:00 · Fed Vice Chair Bowman, eSLR · n/a · n/a · USD

15:30 · Fed's Williams and Cook, panel · n/a · n/a · USD · GC

16:30 · Fed balance sheet · n/a · 6.748T · USD

After close · Nike fiscal Q1 · n/a · n/a · YM · ES

Any time · Iran's reply to US counterproposal · n/a · n/a · CL · GC · USD · ES

The calendar was enumerated from Trading Economics and cross-checked against MarketWatch's Thursday list and the Federal Reserve Board's own calendar. Thursday's fixed cadence (claims at 08:30, EIA natural gas at 10:30) is included. The Board calendar confirms Waller, Jefferson, Bowman and Cook. Barkin, Collins and Schmid at 09:05 and Williams at 15:30 come from Trading Economics only; MarketWatch also lists Williams. Consensus figures are Trading Economics'. Trading Economics also shows a Challenger job-cuts figure as already released, which the desk could not confirm, so it is left out.

The fulcrum is ISM at 10:00, and its prices component in particular. Chicago PMI jumped 11.7 points on Wednesday, so the market is expecting a strong ISM. A headline above 55 with prices above 72 would support the long-end selloff and the dollar. A miss would take some pressure off the long end. Jefferson at 13:30 is the first Board-level speaker since PCE. If he sounds like Williams, October odds could fall further. If he sounds like Kashkari, they could come back.

Later this week: Friday brings September payrolls, with Trading Economics at 90K against 162K in August, and unemployment at 4.1%.

Index Movers

Ranked by index contribution. The Dow is price-weighted, so $1 in any constituent is worth roughly 5.9 Dow points (divisor about 0.168, secondary source; treat these as approximate). Closes and pre-market quotes are from MarketWatch, about 06:40 ET.

GS $900.36, -$15.88 (-1.73%) and CAT $810.79, -$15.85 (-1.92%) on Wednesday. That is about -94 Dow points each, or roughly 190 of the Dow's 444-point fall from two stocks. Both are high-priced, rate-sensitive cyclicals. YM fell 0.82% while NQ rose, and these two names explain most of the gap. GS is -0.16% and CAT is +0.63% pre-market
UNH -$7.86 (-2.10%), SHW -$7.17 (-2.17%), TRV -$6.70 (-1.84%) and V -$6.55 (-1.79%) took about -170 Dow points between them. JPM fell 1.24%, HD fell 1.23% and MCD fell 1.30%. Higher yields hit financials, insurers and housing-linked names together
AAPL $333.02, +$3.62 (+1.10%) was the largest positive contributor among the names checked for the S&P 500 and the Nasdaq-100, worth about +21 Dow points. It recovered part of Tuesday's 2.66% drop. MSFT +0.77% and NVDA +0.51% also helped NDX finish higher. META -1.84% was the largest drag on NDX. It is -0.26% pre-market
MU $1,065.11, +$0.03 on Wednesday, and +0.04% pre-market. Fiscal Q4 revenue was $54.23B against about $51.2B expected. Non-GAAP EPS was $33.42 against about $31.6. Fiscal Q1 guidance is $61.5B ± $1.5B. Long-term supply commitments rose to $32B from $22B, per Reuters. The Nikkei rose 3.3% on the result, and the stock is flat. The NQ gain this morning is coming from NVDA (+1.11%) and AVGO (+1.12%) pre-market
NKE reports after the close. It is a Dow constituent, but at $35.40 a 10% move would be worth only about 20 Dow points. It is near a 12-year low and down 44% this year, per MarketWatch. The result matters for consumer sentiment more than for YM

What Would Change The Read

Scoring Wednesday's calls. We said a 0.3% core PCE was priced. It printed 0.2%, and October hike odds fell from about 45% to about 37%. We asked whether the 10-year would hold under 5.297%. It did not: it closed at 5.291% and traded at 5.347% overnight. We asked whether gold would keep rising if DXY fell through 101.17. DXY rose to 101.85 instead, and gold added only $7. We asked whether Micron would beat the preview numbers. It beat both, and the stock has not moved
Whether the 10-year holds under 5.347%. That is the overnight high and the highest since 2002, per MarketWatch. The front end is lower this morning. If ISM is hot and the 2-year rises too, both ends of the curve would be selling off together, which has not happened since Williams spoke
Whether EUR/USD holds 1.1292 or lower. It is at a new 52-week low. Today's US speakers matter less for the pair than whether Europe's bond selloff continues
Whether Brent holds $100 on the December contract. It is the first time since the roll. Iran's response to the US counterproposal is the catalyst, in either direction
Whether NQ can stay ahead of YM if yields keep rising. Wednesday's split (NDX +0.23%, Dow -0.86%) held only because the AI names were strong enough to offset rate-sensitive stocks. A hot ISM could test that

The Bottom Line

The Fed's preferred inflation measure came in soft, the market took about 8 percentage points off October, and the 10-year still made a 24-year high. Two things are now driving prices: the front end responds to the Fed, and the long end responds to growth, oil and a global bond selloff that the Fed does not control. That is why the dollar is at a 52-week high while hike odds fall, and why NQ and YM are moving in opposite directions. ISM at 10:00 tests the growth side, and four Board speakers test the policy side. Payrolls close the week.

_For informational purposes only. Not investment advice._