Stocks Set A Record And Borrowing Costs Set A 24-Year High

The Nasdaq composite closed at a record on Monday while the yield on the ten-year Treasury note touched its highest level in 24 years, two things that do not normally happen on the same afternoon. By Tuesday morning government borrowing costs had eased back and share prices were set to open higher. Two of the year's largest corporate deals also moved: Paramount's purchase of Warner Bros. Discovery closed, and C.H. Robinson agreed to buy the truck broker RXO.

Fast Facts

• The U.S. services economy grew more slowly in September, with the Institute for Supply Management's survey of purchasing managers at 54.9 against 55.4 in August, the Wall Street Journal reported, and anything above 50 still means growth (Read More)
• $45.9 billion is what the trading arms of New York Stock Exchange member firms earned in the first half of 2026, and New York's comptroller says the full year could pass $90 billion at that pace (Read More)
• Taiwan Semiconductor Manufacturing Co., which builds the chips Nvidia and Apple design, is weighing another investment in Texas, according to people familiar with the matter (Read More)
• Bondholders of Electronic Arts alleged a $1.4 billion default, saying the videogame maker owes them a premium after what the Wall Street Journal called the largest leveraged buyout ever (Read More)
• Ariel Investments, which owns 5.4% of the Barbie maker Mattel, said on Monday it believes the shares are worth considerably more than the market pays while the company stays public (Read More)
• Social Security is on course to pay 22% less in benefits from 2032 unless Congress acts, and a Forbes analysis weighed the leading fix, lifting the cap on wages subject to the payroll tax (Read More)

Global News

• German manufacturing orders dropped 10.6% in August from the month before, a steep fall for the eurozone's largest economy, which the Journal linked to energy costs kept high by the Middle East conflict (Read More)
• The euro traded around $1.122 on Monday, its weakest against the dollar since May 2025 and down nearly 7% from its late-January peak, as investors weigh France's public finances (Read More)
• Britain's Informa agreed to buy the live-events company Clarion Events from Blackstone for £2.24 billion in cash, and to spin off its academic publisher Taylor & Francis (Read More)
• Oil shipments out of the Gulf excluding Iran recovered to 81% of their pre-war level in September, crude cargoes back to 91% while refined fuels such as diesel lagged behind (Read More)

Stocks Set A Record While The Government's Own Borrowing Cost Hit A 24-Year High

The Nasdaq composite closed at a record on Monday, October 5, and on the same day the yield on the 10-year U.S. Treasury note touched what the Wall Street Journal called a fresh 24-year high. A yield is the annual return a buyer earns for lending money to the federal government, which makes it the government's own cost of borrowing. For the October 5 session, Treasury's published curve put the 10-year at 5.31% and the 30-year at 5.66%, each up three hundredths of a percentage point from the October 2 session, which traders call three basis points. The Journal put the pairing down to a global bond selloff and an artificial-intelligence investing boom moving through markets at once.

By Tuesday morning the trade ran the other way. Treasury yields turned lower and eurozone government bond yields slid as investors weighed whether the selloff had gone further than the news warranted. Oil fell below $100 a barrel. One session of lower yields after weeks of higher ones is still one session.

A government bond yield reaches share prices through arithmetic. A stock is worth the profits a company will earn in future years, converted into today's money, and the rate used for that conversion starts from what a government bond pays, since that is the return available without taking on any one company's risk. Raise the baseline and a dollar of profit arriving in 2034 is worth less today, which bites hardest on companies whose earnings sit furthest out. The pressure shows up in the corporate bond market first, though, because there the cost is immediate and written into a contract. Borrowers rated triple-C and lower, the credit graders' label for the shakiest issuers, paid about 17% in annual interest this month, and the risk premium, the extra a company pays above the government to borrow for the same stretch of time, sat near 12 percentage points, the widest since 2022.

Supply is already thinning: Bank of America cut its forecast for this month's sales of investment-grade corporate bonds, debt from issuers the raters consider relatively safe, to $110 billion from about $160 billion, and some deals are being pulled or delayed as investors turn more selective. Moody's estimates $1.45 trillion of that debt comes due between 2026 and 2030, and each bond has to be replaced at whatever rates exist on the day it matures. Traders who bet on the Federal Reserve's next move are pricing in three to four further increases by early 2028, from a target range of 3.75% to 4% now. That is an expectation rather than a decision.

Sources: WSJ on the record close · WSJ on Tuesday's yield reversal · Investing.com · U.S. Treasury · Federal Reserve · Rapunzl on the last time the selloff reversed

Paramount Closed The Warner Bros. Discovery Deal And Started Operating As Skydance

Paramount's acquisition of Warner Bros. Discovery closed, and the combined company began operating Tuesday under a new name, Skydance. Warner shareholders were paid $31.00 a share in cash, about $81 billion for the shares themselves and roughly $110 billion once you add the debt that comes with the company. Either way it is the largest media takeover on record. David Ellison is chairman and chief executive, with Ynon Kreiz as co-chief executive. The deal came through court challenges, public protests and regulatory scrutiny, and in September Paramount settled an antitrust lawsuit brought by a dozen U.S. states along with a separate suit from the Writers Guild of America. Antitrust law is the set of rules meant to stop one company from gaining too much control over a market.

How it got funded came the week before. Paramount Skydance sold about $52 billion of bonds to pay for it, a bond being an IOU: the company takes cash now and promises to pay it back on a set date, with interest along the way. Orders for the two-year bonds ran nearly double the orders for the thirty-year bonds, which says lenders were willing to fund this, just not for very long, and a buyer holding studios for decades would rather borrow for decades to match. All of this landed in a week when long-term U.S. government borrowing costs reached a 24-year high, and companies borrow on top of what their government pays.

That $52 billion now sits on the combined company, roughly two thirds of the $81 billion paid out to shareholders, and money borrowed for two years has to be repaid or replaced in two years at whatever interest rate exists then, a figure nobody has today. The price of long-term borrowing is also what sets the size of the deals that happen at all: a buyer can only offer what it can fund. The studios behind a great deal of what turns up on the screens in your house now sit inside one company.

Sources: NPR · WSJ · Yahoo Finance · Investing.com · France 24 · Rapunzl on Paramount's bond sale

The Biggest U.S. Freight Broker Agreed To Buy The Third Biggest

C.H. Robinson agreed on Monday to acquire RXO, putting the largest freight broker in the United States together with the third largest. A freight broker is the matching layer in the middle of shipping: companies with goods to move on one side, trucking companies with empty space on the other, and the broker taking a cut for pairing the two up. RXO's owners get paid partly in dollars and partly in shares of the buyer, $17.25 in cash plus 0.0856 of a C.H. Robinson share for every RXO share, which works out to $30.25 a share, or roughly $5.8 billion, a 27% markup on RXO's average trading price over the past 90 days. C.H. Robinson is targeting about $300 million in net annual cost savings within two years of closing, and the companies expect to close in the first half of 2027, provided shareholders vote yes and regulators sign off.

Every load a broker places is an actual pallet of something moving down an actual highway, so the volume running through the brokers is one of the most direct reads anyone gets on how much physical stuff the economy is shipping. Joining the first and third largest firms in that matching layer is the part customers, trucking companies and regulators will study hardest: a shipper with a load to move would have one fewer large desk to call, and a trucker looking for work would have one fewer big buyer of its capacity. That is what a regulatory review exists to weigh. The $300 million, meanwhile, is a goal the company has set itself, not money it has already saved.

Sources: C.H. Robinson · CNBC · WSJ · Yahoo Finance · Transport Topics

What To Watch

The Bureau of Economic Analysis is scheduled to publish International Trade in Goods and Services today at 8:30am ET. Michelle Bowman, the Federal Reserve's vice chair for supervision, is expected to speak twice, at 10:45am on modernizing bank supervision and again at 3:00pm on bank capital rules.

Wednesday brings the minutes of the Federal Open Market Committee's September 15-16 meeting at 2:00pm, the closest thing to a transcript of how the committee reached its last decision, three weeks before the next meeting on October 27 and 28.

Eleven companies are expected to report today. Constellation Brands is expected after the close at an average analyst estimate of $3.62 a share against $3.63 a year earlier, RPM International before the open at $1.95 against $1.88, and the frozen-potato producer Lamb Weston before the open at $0.59 against $0.74.

Later in the week: Levi Strauss on Wednesday after the close at $0.36 against $0.34; PepsiCo, the largest company reporting this week, Thursday before the open at $2.29 a share, level with a year earlier; and Delta Air Lines Friday before the open at $1.96 against $1.71, the first read on travel demand with jet fuel this expensive. Every earnings figure is an analyst expectation, not a result.

The Classroom Takeaway

Share prices and the cost of borrowing rose together on Monday, and those two usually pull against each other. That is easier to understand by watching a portfolio live through it than by reading about it afterwards, which is what a practice portfolio that runs on real market prices is for.