Spiking bond yields, midterms and earnings to test US stocks’ typical fourth-quarter strength

Since 1945, the S&P 500 has averaged a 4.2% fourth-quarter gain, rising 85% of the time. Fourth quarters in midterm years have averaged a 6.4% gain, though the article notes that midterm years overall have historically seen an average 15% S&P 500 decline. One strategist said her firm is on “high alert” for a pullback before election day, including if Democrats appear likely to take control of both chambers of Congress.

The 10-year Treasury yield hit 5.34% on Thursday, its highest level in 24 years. Investors cited strong growth expectations, rising energy costs and corporate borrowing to fund AI expansions as factors behind the jump. Minutes from the Federal Reserve’s meeting are due Wednesday and could offer clues about its rate outlook; after weaker-than-expected jobs data, markets continued to bet the Fed would likely hold off on a second consecutive hike later in the month.

PepsiCo and Delta Air Lines are among the large companies scheduled to report third-quarter results next week, ahead of broader reporting by major banks the following week. S&P 500 companies are expected to have increased third-quarter earnings by more than 30% from a year earlier. Investors are also watching for changes to AI hyperscalers’ capital-spending plans, which one equities executive called the key item to watch.