The Ledger Letter Finance Studio Advisors · October 19, 2026 |
October Hike Odds Went From 50% to 15% in Two Days. Stocks Sold Off Anyway.Treasury yields fell, the dollar lost ground, and the S&P 500 still dropped 1.95% on the week. Here is what splits them. |
The Breakdown Rates and currencies priced a Fed that waits. Equities priced a financing problem that a pause does not fix. |
| 01 | Hike odds round tripped Hot September inflation pushed October hike odds to 50% on Wednesday. By Friday they sat near 15%, close to where the week started. |
| | 02 | Bonds and the dollar agreed The 10-year closed at 5.09% and the 2-year at 4.74%. The dollar index fell about 0.4% for its first weekly loss since early September. |
| | 03 | Equities did not The Nasdaq Composite fell 4.48%, its worst week since June. The Dow rose 0.67% over the same five sessions. |
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A Message From Our Partner The ticker is TLT… and Larry Benedict says it just became more important than ever. The Federal Reserve’s recent hike could send it moving fast, and Larry plans to trade it in an unusual way that could double your money… |
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| By the Numbers | October hike odds | About 15%, down from 50% | | December hike odds | About 90% | | 10-year Treasury | 5.09% | | 2-year to 10-year spread | 35 basis points | | S&P 500 | 7,659.44, down 1.95% on the week |
Rate odds from CME FedWatch as of the October 16 close. Treasury par yields from the US Treasury daily curve. Index levels as of the October 16 close. |
Four markets read one week four different waysWhat the Headlines Lead With Futures point higher on Monday. Nasdaq 100 contracts rose about 1.1% and S&P 500 contracts about 0.4%. A chip ETF is set for its first daily gain in 10 sessions. The framing is simple. Last week was a technology problem, and the technology problem is steadying. China helped overnight. Third quarter growth came in at 4.5% against a 4.4% forecast, and retail sales rose 1.1% against 0.5%. Europe went the other way, with the Stoxx 600 down about 1% after a weekend of violent protests in France. Brent crude eased but still trades near $108 a barrel. |
From Our Partner They told you the stock market was your retirement plan, while they loaded up on hard assets. |
Why It Matters The rate market moved more than the stock market last week. September CPI rose 0.6% on the month and 3.7% on the year, above the 3.6% forecast. October hike odds jumped from 22% to 50% within hours. Then they fell. Fed officials including Mary Daly and Christopher Waller played down any urgency to move this month. By Thursday afternoon the odds were back to 28%. Chair Kevin Warsh spoke in Bangkok on Friday and declined to prejudge the meeting, which took them near 15%. December is a different story, priced close to 90%. |
A Message From Our Partner A drilling crew near the Grand Canyon just confirmed what the International Energy Agency calls enough energy to meet global electricity demand 140 times over. Google signed a 15-year deal, and Bill Gates wrote a $100 million check. On October 20th, Washington hands this resource an edge no other energy source has. One company sits at the center. |
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What It Means for Your Money The 2-year note yields 4.74% and the 10-year yields 5.09%. The gap is 35 basis points, down from 42 on Tuesday. The 2-year has added 127 basis points this year and the 10-year 90. That is what a flattening curve looks like in real time. Short cash still pays nearly as much as long duration, with far less price risk. Mortgage quotes track the 10-year, so the drop helps borrowers at the margin. Do not expect much more. The funds rate sits at 3.75% to 4.00% and December is close to fully priced. Most of this inflation is energy, fed by the Iran war, and the Fed cannot drill wells. |
From Our Partner Your money is getting tight and prices are going up, which can make figuring out what to cut back on feel completely overwhelming. |
The Day Ahead Fifth Third reports Monday. Tuesday brings Netflix, General Motors, GE Aerospace and RTX, plus September housing starts and building permits. Meta Platforms and Tesla follow on Wednesday. About 212 companies worth more than $2 billion report between Monday and Friday. The Fed is in blackout until October 29, so no official will steer the market this week. Friday also ended a 55-day run without a 1% decline in the S&P 500. That was the longest such streak in more than six years. Guidance matters more than the quarter this week. Several of these companies fund data centers with borrowed money, and that is the thread equities pulled last week. One cautious line on financing costs can move the group more than a revenue beat. The equal weighted S&P 500 just had its best week against technology since 2009. Watch which one this week confirms. |
The bond market has already made its call. Earnings decide whether equities have to agree. |
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