Fed Week Begins with Stocks, Yields Both Higher?

Plenty of intrigue remains before the holidays. The Federal Reserve's rate decision Wednesday afternoon, AI-related earnings, and next week's November jobs report all could set the tone heading into 2026. Historically, major indexes often tread water before a Fed meeting, and the same could be true the next few days. Odds of a rate cut neared 90% early today, according to the CME FedWatch Tool, and major indexes ticked higher on support from tech. Though the Fed is expected to slice rates for the third-straight meeting to a three-year low, Treasury yields rallied fiercely last week. A Japanese yield spike helped jumpstart the move, a possible headwind for stocks, and the benchmark 10-year Treasury note yield stayed near the top of its short-term range early Monday. A Fed rate cut, ironically, might push yields higher. "If the Fed is seen cutting interest rates when the inflation issue is still prevalent simply because the administration advocates that, then what probably will happen is long-term rates will go up as short-term rates go down," said Kathy Jones, chief fixed income strategist, Schwab Center for Financial Research (SCFR). "That's called a steeper yield curve. And that is counter to what the administration really wants to accomplish." Higher yields can slow the economy, though equities participants didn't seem overly concerned last week. On Friday, major indexes rose for a fourth straight session and the S&P 500 index approached all-time highs after September Personal Consumption Expenditures (PCE) prices turned out mostly as expected. Core annual PCE—which excludes food and energy—was 2.8%, below consensus of 2.9% but above the Fed's 2% goal. This week's key data is tomorrow's 10 a.m. ET September Job Openings and Labor Turnover (JOLTS) report, though it's dated. Consensus is 7.2 million, a relatively high number historically that would be little changed from August.

Three things to watch

AI earnings ahead: Oracle (ORCL) and Broadcom (AVGO) put the spotlight back on AI Wednesday and Thursday after the close, respectively. Broadcom shares catapulted along with Alphabet's (GOOGL) this quarter as investors cheered Alphabet's new Gemini 3 platform. Many of Alphabet's chips are designed by Broadcom. When Oracle results arrive, focus will likely be on spending. Bloomberg reports that Wall Street is lending "massive amounts of money" to the biggest AI players. Concern centered around Oracle's borrowing to build AI helped push shares down almost 40% from their September peak. "Oracle could deliver strong results to help assuage investor concerns over AI spending, or of course they could disappoint and sour investment sentiment," said Nathan Peterson, director of derivatives research and strategy, SCFR. "Leading up to Wednesday, I feel that it's likely that markets remain in a 'wait and see' mode, which likely means some choppy sideways price action."
Treasury auctions loom amid Japan competition: Two Treasury auctions this week could help provide yield direction, with 3-year notes on the block this afternoon and 10-year notes tomorrow. Demand at recent auctions dipped, a concern as foreign yields turn more competitive. Rising yields here tend to hurt business and consumer borrowing, potentially slowing growth. "The Bank of Japan could hike this month, despite concerns about the government meddling in monetary policy," said Michelle Gibley, director of international equity research and strategy, SCFR. "Prime Minister Takaichi has made comments in the past that were not supportive of hiking rates. Add in the announcement of the largest fiscal stimulus since pandemic restrictions eased, and the yen reversed nearly all its strength this year in November. By delaying hikes and allowing the yen to weaken, this could increase inflation and intensify the need to hike rates." Investors not used to monitoring Japanese yields may want to start. If these turn lower and pull U.S. Treasury yields down along with them, that could support U.S. stocks this week, Schwab's Peterson said in his Weekly Trader's Outlook. However, Japanese yields rose another two basis points earlier Monday and are at 17-year highs.
Possible clues for direction include crypto: Bitcoin futures (/BTC) popped 2.8% early Monday and shares of crypto-related stocks including Coinbase (COIN), Strategy (MSTR), and Circle Internet Group (CRCL) also climbed in an early sign that "risk-on" might be in force today across markets. Bitcoin's 20-day moving average is just below $93,000 and may be an area to watch, as futures haven't closed above its 20-day since October 16. For a signal of risk-on versus risk-off sentiment in the markets, consider watching Bitcoin, which appeared to affect stocks when it dove early last week. Also keep an eye on gold, as some of crypto's struggles then appeared tied to traders rotating out of crypto into the yellow metal. Gold inched lower this morning but is near all-time highs above $4,200 an ounce. Volatility rose slightly this morning for stocks, a possible headwind for the early rally.

See Schwab Insight Here

Let’s talk

The best way to see if we’re a good fit is to have a conversation. Call, email, or fill out the form below to speak with one of our team members. We’ll get in touch as soon as possible.

We describe the Horter investment management platform by using the terms “Low Risk” and “Low Volatility” to emphasize the strategies employed by our money managers. However, notwithstanding the risk management strategies employed by these money managers, certain investment portfolios employed by our money managers present a greater degree of investment risk than others depending upon the performance of the underlying securities. We typically refer to these strategies as “Moderate Risk” and “Moderate Volatility”. Such performance can be impacted by a number of risk factors, including but not limited to (i) the level of price volatility (equity securities generally have greater price volatility than debt securities, (ii) changes in interest rates, and (iii) the ability of the manager to purchase or sell a security in a timely manner at desired prices.

Investment advisory services offered through Horter Investment Management, LLC, a SEC-Registered Investment Advisor. Horter Investment Management does not provide legal or tax advice. Investment Advisor Representatives of Horter Investment Management may only conduct business with residents of the states and jurisdictions in which they are properly registered or exempt from registration requirements. Insurance and annuity products are sold separately through Horter Financial Strategies, LLC. Securities transactions for Horter Investment Management clients are placed through AXOS Advisor Services, Charles Schwab & Co. and Nationwide Advisory Solutions.