October 7, 2026

Stocks started the fourth quarter on a positive note, with the S&P 500 closing just below its all-time high. Most major technology stocks rose, helping the Nasdaq-100 set a new record. Materials stocks led the S&P 500’s sectors, while real estate shares lagged. The Nasdaq-100’s gains followed reports that OpenAI may be in talks with several funds to raise $30 billion at a valuation well above $1 trillion. West Texas Intermediate (WTI) crude fell below $88 per barrel after Yemeni forces reportedly recaptured the city of Mocha from the Iran-backed Houthis.

 

Topics of the week: 

  • The mortgage gap is the widest in 40 years. About 20% of homeowners hold rates below 3%, and moving from a 3% to a 7% rate on a $400,000 home adds nearly $1,000 a month. That lock-in is likely to suppress housing activity and economic dynamism until the gap narrows.

  • Inflation fog is back. After easing earlier this year and raising hopes for a Goldilocks economy, the inflation dashboard is turning red again following the mid-summer head-fakes.

What we are watching:

  • Policy support could create inflation risks. If the Fed eventually intervenes to cap longer-term yields, markets could interpret the move as prioritizing government financing over controlling inflation. That could weaken the dollar and increase inflation expectations.

  • Interest expenses are rising quickly. Federal interest costs are approximately $1 trillion this fiscal year and now exceed spending on defense or Medicaid. Because a significant portion of government debt matures within one year, additional Federal Reserve (Fed) rate increases could raise these costs relatively quickly. 

 

Index Data & Market Performance

 

Data as of Market Close  10.5.26 

source: gemini.google.com*

In Focus

The FOMC Meeting Minutes are the absolute headline event of the week. These minutes will expose the internal debate behind the Fed's decision under Chair Kevin Warsh to raise the federal funds rate by 25 basis points to a 3.75%–4.00% range. Markets want to gauge how much appetite remains for another hike in 2026, though subsequent cooler inflation data has since tempered rate-hike expectations.

 

Key Reports:

  • Monday: ISM Services Index 
  • Tuesday: ADP Weekly Employment Change, Trade Balance 
  • Wednesday: MBA Mortgage Applications, FOMC Meeting Minutes, Consumer Credit 
  • Thursday: Initial Jobless Claims, Continuing Claims
  • Friday: Consumer Sentiment Report 
     

What's Trending: Oil's Hidden Market Driver

What are “Crack spreads"?

Crack Spreads are the profit margin for refining crude oil into diesel, and they are hitting record highs and threatening global markets. While investors usually focus on raw oil, severe geopolitical conflicts have choked refinery supplies. 

Because diesel powers global shipping, farming, and manufacturing, these soaring margins are driving up business costs, squeezing corporate profits, and throwing a wrench into central bank interest rate plans.

Here are the facts: 

  • The Core Metric: A crack spread measures the price gap between raw crude oil and refined products like diesel; it serves as a critical, real-time indicator of global fuel market tightness and supply imbalances.
  • The Record Spike: Driven by a "perfect storm" of Middle East air strikes, Strait of Hormuz shipping disruptions, and Ukrainian drone strikes on Russian refineries, U.S. diesel spreads surged to an all-time high of $118.32 per barrel—nearly triple the historical average.
  • The Inflation Threat: These elevated shipping and industrial costs threaten to reignite sticky services inflation, which heavily complicates monetary policy and interest rate paths for the Federal Reserve, ECB, and Bank of England.
  • The Export Ban Risk: Critically low inventories have U.S. policymakers considering a domestic diesel export ban.

Ultimately, this energy market squeeze creates severe headwinds for businesses and heavily complicates the path forward for central banks as they navigate sticky inflation and interest rate policy. In conclusion, surging diesel crack spreads have emerged as a critical driver of market volatility, overshadowing traditional crude oil prices as geopolitical conflicts choke global refining capacity. 

 

Disclosures

*The data for the total returns of the S&P 500, Dow Jones 30, and NASDAQ Composite are compiled and published by several financial news outlets, index providers, and government/academic sources.

Based on typical financial data providers and the search results, here are the likely sources for this data:

  • S&P Dow Jones Indices (S&P Global): This is the official index calculator for the S&P 500 and the Dow Jones Industrial Average (DJIA). They publish index data, including total returns, in daily, weekly, and monthly reports/commentary.
  • Nasdaq Global Indexes: They are the official index calculator for the NASDAQ Composite. They also publish fact sheets and performance reports with total return data.
  • Financial News Agencies and Publications: News outlets like The Associated Press (AP) and financial publications like Investopedia regularly report on the daily, weekly, and year-to-date (YTD) returns of these major U.S. indexes.
  • Federal Reserve Economic Data (FRED) / St. Louis Fed: FRED, maintained by the Federal Reserve Bank of St. Louis, is a public resource that often includes daily closing levels for indices like the S&P 500, which can be used to calculate returns.
  • Financial Data Platforms (e.g., Bloomberg, YCharts, MSCI): Professional and commercial financial data providers often republish or calculate returns based on the official index data for their clients.