Markets at the Start of Q4 2026: What's Moving and Why

Data as of October 6th

October arrived with markets pulling in several directions at once. Stocks held their ground — and in some cases notched fresh records — even as Treasury yields surged to levels not seen in more than two decades, oil prices climbed sharply, and gold gave back some of its earlier gains. Here is a plain-language look at what happened across major asset classes as the fourth quarter got underway, and what it may mean for long-term investors.

Stock Indexes: Mixed September, Stronger Start to Q4

The third quarter ended on an uneven note. The S&P 500 slipped 0.5% over September, while the Dow Jones Industrial Average dropped 4.3%. The Nasdaq held up better, finishing September with a 1.9% advance, driven by continued strength in technology stocks. Small caps fared worst: the Russell 2000 dropped more than 5% in September, bringing its third-quarter decline to about 7.5%.

The opening days of October told a different story. On October 1, the S&P 500 added 0.19% to close at 7,666.45, with the Nasdaq eking out a small gain as well, even as Treasury yields briefly spiked to multi-decade highs. By Monday, October 5, the Nasdaq closed at a record high of 27,477.31 — blowing past its prior record — while the S&P 500 climbed 0.66% to 7,773.95. Technology led the charge, with the sector lifted by AI-related names including Micron and Alphabet.

Looking ahead, S&P 500 companies are expected to report earnings-per-share growth of 27% on a year-over-year basis for the third quarter, according to Goldman Sachs — a strong figure, though it represents a step down from the 33% realized growth reported in the second quarter of 2026.

Stocks and bond yields moving higher at the same time is unusual and warrants attention — but one quarter of market turbulence rarely changes the math for a well-structured long-term plan.

Treasury Yields: The Biggest Story of the Quarter

The most significant development heading into Q4 was what happened in the bond market. On October 1, the 10-year Treasury yield rose to as high as 5.34% — its highest level since early 2002, surpassing its 2007 peak. The 30-year yield also climbed to a level not seen in more than two decades. The global benchmark posted its biggest quarterly rise this century in the third quarter, a move that rattled fixed-income investors worldwide.

By October 6, the 10-year yield had retreated somewhat, easing to around 5.27%, but it remained near historic highs. Over the past month, the 10-year yield has edged up nearly half a percentage point and sits more than a full percentage point above where it was a year ago.

Several forces are at work. Rising energy prices have kept inflation elevated, while the buildout of AI infrastructure has drawn capital away from bonds and lifted forecasts for both growth and long-run rates. Heavy federal borrowing has also added to the supply of Treasuries, weighing on prices. The practical effect for households: the average 30-year mortgage rate has moved above 7% for the first time since early 2025, and financing costs have risen across auto loans, credit cards, and business debt.

The Fed: One Hike Done, Another on the Table

At its September 16, 2026 meeting, the FOMC raised the federal funds target range to 3.75%–4%, up from 3.5%–3.75%. The move was widely expected. As of the start of October, the effective federal funds rate sits at 3.88%, per the Federal Reserve's own daily data.

The next decision is scheduled for October 28, 2026. Market-implied probabilities currently show a higher chance the Fed holds rates steady at that meeting, with a lower chance of another 25 basis-point hike. A weaker-than-expected jobs report on October 2nd helped ease some of the pressure, with markets taking the data as a sign that additional hikes may not be imminent. Traders, however, still expect rate policy to remain elevated for an extended period, and the minutes from the September meeting — due for release this week — will be closely watched for any fresh signals.

Commodities: Oil Up, Gold Pulling Back

Energy prices have been one of the defining market stories of 2026. As of October 6, WTI crude oil was trading around $89.79 per barrel, up roughly 56% year-to-date, while Brent crude crossed $100 per barrel — a 66% gain year-to-date. Geopolitical tensions in the Middle East continue to drive energy markets, with commodity markets repricing risk in real time, according to J.P. Morgan Research.

Gold has had a more volatile recent stretch. After reaching an all-time high of $5,608 per troy ounce in January 2026, the precious metal has pulled back considerably. Gold futures were trading near $4,169 per troy ounce on October 6, down roughly 6% over the past month, though still about 4.5% higher than a year ago. A stronger U.S. dollar and rising Treasury yields continue to pressure precious metal prices, even as safe-haven demand has provided some support.

What This Means for Long-Term Investors

Markets rarely move in clean, comfortable lines. Elevated yields, rising oil, record equity highs, and an uncertain Fed path can all coexist — and they often do at major turning points. For most long-term investors, we believe the bigger risk is reacting to short-term turbulence rather than staying aligned with a plan designed to handle it.

A few things are worth keeping in mind as Q4 unfolds. Higher bond yields mean higher income on new fixed-income purchases — a genuine shift from the near-zero rate environment many investors spent years navigating. At the same time, existing bond positions have faced price pressure, which is a reminder of why duration matters. On the equity side, a broadening rally — the Russell 2000 has outperformed the S&P 500 year-to-date despite its rough third quarter, may offer opportunities for portfolios positioned beyond just mega-cap technology though small-cap stocks have historically been more volatile. And energy's sharp move higher has tax implications for portfolios with energy exposure that are worth reviewing before year-end.

Common questions

How high did Treasury yields go at the start of Q4 2026?

On October 1, 2026, the 10-year Treasury yield rose to as high as 5.34% — its highest level since early 2002, surpassing its 2007 peak. The move came at the end of a quarter that posted the biggest quarterly rise in U.S. Treasury yields this century. By October 6, the 10-year yield had retreated slightly to around 5.27%.

What did the Fed decide at its September 2026 meeting?

At its September 16, 2026 meeting, the FOMC raised the federal funds target range by 25 basis points to 3.75%–4%. The next scheduled decision is October 28, 2026. As of early October, market-implied odds show roughly an 83% probability that the Fed holds rates steady at that meeting, though another hike remains possible.

Why did gold pull back if inflation is still elevated?

Gold typically struggles when the U.S. dollar strengthens and Treasury yields rise sharply — both of which occurred heading into October 2026. Higher yields make yield-bearing assets more competitive relative to gold, which pays no income. Gold fell roughly 6% over the past month, though it remains above its year-ago level. Elevated safe-haven demand from international investors has helped put a floor under prices. As with any asset, gold's near-term moves involve material uncertainty.

Sources

• 10-year Treasury yield hit 5.34%, its highest since 2002, on October 1, 2026

• S&P 500 closed at 7,666.45 on October 1 and the Russell 2000 dropped over 5% in September

• Nasdaq closed at a record high of 27,477.31 on October 5, and Goldman Sachs expects 27% EPS growth for Q3

• The effective federal funds rate was 3.88% as of early October 2026

• WTI crude was ~$89.79/bbl and Brent was ~$100.97/bbl on October 6, 2026, with WTI up 56% YTD

Important Disclosures: This content for general educational purposes only. Securities are offered through LPL Financial, Member FINRA/SIPC. Advisory services are offered through Convergence Financial, an SEC-registered investment adviser; registration does not imply a certain level of skill or training. HomeBrook Wealth and Convergence Financial are separate entities from LPL Financial. This is not individualized investment, tax, or legal advice, or an offer to buy or sell any security, and may not suit every investor. Information is as of the publication date and subject to change without notice. Opinions and forecasts, including third-party ones, are not guarantees. Data is from sources believed reliable but not guaranteed. Indexes are unmanaged, cannot be invested in directly, and do not represent client results. Examples are hypothetical and for illustration only. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Bonds lose value as rates rise; small caps, commodities, and concentrated sectors can be more volatile. Convergence Financial does not provide tax or legal advice. Third-party links are provided for convenience only, and we are not responsible for their content.