How much higher can bond yields rise - and what does it mean for stocks?

By Philip van Doorn

Also in Weekend Reads: Adjustable-rate mortgage loans, Gen Z entrepreneurs and advice from the Moneyist

The S&P 500 has returned 13% so far in 2026, even as bond yields have soared.

Bond prices declined again this week, which means long-term interest rates continued to climb. This is a moment of pain for investors holding bonds or shares of bond funds, but also one of opportunity for investors who want to generate income.

On Friday, 10-year U.S. Treasury notes BX:TMUBMUSD10Y were yielding 5.28%, up from 4.76% at the end of August and 4.17% at the end of 2025. And on Thursday, Freddie Mac said its weekly national average 30-year mortgage rate had increased to 7.28%, a three-year high, from 7.03% a week earlier and from 6.34% a year ago.

Christine Idzelis compared this year's jump in yields with previous periods of bond-market turmoil and considered whether bond investors are overshooting the mark as they anticipate further interest-rate increases by the Federal Reserve.

More coverage of the bond market:

-- The hidden silver lining of high interest rates: Safer, cheaper retirement income

-- A brutal September for bonds points to an even darker October

-- Retail investors are aggressively piling into this bold contrarian bet through one ETF

Why hasn't the S&P 500 declined as interest rates have soared?

The S&P 500 returned 13% for 2026 through Oct. 1, with dividends reinvested. That measures up well against a 30-year average annual return of 10.3%, according to FactSet.

So far this year, the S&P 500 SPX has returned 13%, with dividends reinvested. The last time the index was down for a full calendar year was 2022, when it declined 18.1%. After keeping the federal-funds rate in a range of 0% to 0.25% for two years, the Federal Reserve switched course in March 2022 to increase the overnight rate seven times, to a target range of 4.25% to 4.50% at the end of that year.

So with this year's tremendous increase in long-term interest rates as the bond market has sold off, you might be wondering why the stock market hasn't declined. After all, the increase in corporate borrowing expenses can be expected to drive profits lower, and investors now have compelling choices to diversify into the bond market for attractive yields.

Barbara Kollmeyer interviewed Daniel Lacalle, the chief economist at Tressis and the co-manager of the Adriza International Opportunities Fund, who said it was "completely logical" for the stock market to continue to rise during the current cycle of bond yield increases. Here's his explanation for the stock market's action and what he recommends you do with your money now.

Some further looks at the stock market:

-- You might be shocked by how many stocks are in a bear market right now

-- October is historically the most volatile month for stocks. But why? These four popular theories fail to hold up.

Your opportunities in the bond market

Genna Contino outlined strategies to weigh rewards and risks in the bond market at today's higher yields.

Should you consider an adjustable-rate mortgage loan?

With 30-year fixed mortgage rates making their largest jump in four years, people looking to buy homes might consider loans with adjustable rates that start off considerably lower than fixed-rated loans.

But you need to look into the details. An adjustable-rate mortgage loan, or ARM, will start with a fixed rate for a certain period, after which the rate will be adjusted periodically, based on a published benchmark such as the Secured Overnight Financing Rate or the yield on 1-year U.S. Treasury bills BX:TMUBMUSD01Y.

ARMs are offered with varying initial fixed-rate periods and periods for rate resets. Aarthi Swaminathan interviewed a couple who took out an ARM in 2023, when 30-year fixed rates had climbed to 8%. Their ARM featured an initial rate of 6.85% for three years and resets every five years following the first reset. Here is how that worked out, along with points to consider when choosing an ARM or a fixed-rate loan in the current market.

Can't find a job? Maybe you can make one.

These entrepreneurs are creating their own career paths.

The U.S. unemployment rate remained low at 4.2% in September. But if you speak with anyone looking for a job, especially in the early stage of their career, you will hear a different story. It is difficult to stand out while hunting for a job. Some young adults' experiences in the job market or the workplace have inspired them to transform their careers.

As part of the New American Playbook series, Andrew Keshner covered the trend of an increasing entrepreneurship rate among younger adults and interviewed several who had created successful new businesses.

More from Andrew Keshner: Choosing these AI-exposed college majors could dent your job prospects - and lower your pay

Related: Job openings are low and hiring is weak. Why the U.S. labor market won't get better soon.

What's really going on with diesel prices

The price of West Texas Intermediate crude oil for November delivery (CL.1) was down 4.2% Friday morning to $88.69 a barrel. Continuous front-month contract prices for WTI (CL00) peaked at $119.48 in March and were over $100 as recently as Sept. 17. So why are diesel prices up 18% since the end of March, while WTI has declined 13% over the same period?

In a deeply reported article, Claudia Assis outlined the mechanics of the global refining market to explain why diesel prices remain stubbornly high and how that is affecting businesses.

Myra P. Saefong explained how we all pay when diesel prices rise.

Nvidia's massive buyback plan, and other Big Tech news

Nvidia CEO Jensen Huang, seated at left, and other AI executives met with President Donald Trump at the White House on Sept. 29. Nvidia has the largest market capitalization of any publicly traded company, at $5.56 trillion, according to FactSet.

This week Nvidia announced a $150 billion addition to its stock-buyback authorization. Obviously the company's board of directors thinks the stock is a bargain. Here's a breakdown of why Nvidia appears to be such a cheap stock right now.

Here is a sampling of coverage from the MarketWatch technology team:

-- Micron delivers blowout earnings. Here's what Wall Street is saying

-- Google shows it's not out of the AI race just yet

-- Mark Zuckerberg is coming for Apple's empire

-- The real prize in AMD's $8 billion World Labs acquisition isn't what you'd think

-- Tesla sold a lot more EVs than Wall Street expected, and the stock is surging

Retirement and estate planning

Beth Pinsker writes the Fix My Portfolio column, and often the "fix" is really about planning. Here's a simple step you can take to help you prepare for retirement, manage expectations and maintain your financial footing.

Advice from the Moneyist

Quentin Fottrell is the Moneyist.

This week Quentin Fottrell - the Moneyist - answered questions from a 67-year-old man who has managed his finances well but needs to continue working to avoid a monthly shortfall. Here is practical advice and a hopeful plan for him to retire in five years.

More from the Moneyist:

-- My wife never went back to work after raising our kids. Do I have to share my retirement savings 50/50?

-- 'We lived within our means': I earned $30,000 as a pastor and still retired comfortably. Why don't you tell people that?

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-Philip van Doorn

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10-02-26 1348ET

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