Stocks closed higher on Friday. And all of the big three indexes closed higher for the week. It was also the second up-week in a row for the Nasdaq.

Big-tech was a big winner. Microsoft gained nearly 4% on Friday after unveiling new AI capabilities for its Copilot platform. Dell and Qualcomm were also higher. And continued AI spending and deal activity further underscored that the AI trade is alive and well.

Also helping stocks were lower oil prices.

As for rising Treasury yields, I contend that rising yields, such as the 10-year eclipsing 5%, is not the equities killer some are fearing.

It's true that traders are expecting more rates hikes to come, with the Fed's latest Summary of Economic Projections (SEP) forecasting one more 25 basis point hike by year's end, putting the Fed Funds rate at 4.1%. But the SEP also sees rates staying at 4.1% in 2027. Suggesting just one more hike. And that's it.

But are rising yields really telling us something worrisome?

Over the past 40 years (1985-2025), the spread between the Fed Funds Rate (FFR) and the 10-yr has historically been 100 to 150 basis points. That includes normalization periods, expansion periods, compression periods, and inversion periods. The median is 120 bps.

Looking at the last 10 years, however, the spread was 25 bps. And over the last 5 years, it was -40 bps due to 2023's inversion. In 2025 the spread was 25 to 75 bps. Currently, the spread is 128 bps, which is pretty much right at the historical median. If the FFR rises to 4.1%, which is expected, that would put the spread at 106 using today's 5.16% for the 10-yr. If the spread maintained its median, that would put the 10-yr at 5.30%.

The point is, I'm not expecting the 10-year to rise forever. Nor am I expecting the FFR to shoot up much more than expected either.

The rise in yields, in my opinion, is simply a reversion to the long-run median spread of 120 bps.

And I am not expecting that to derail this historic bull rally in equities.

This week, the market will focus its attention on Wednesday's Personal Consumption Expenditures (PCE) index (which is the Fed's preferred inflation gauge).

And then on Friday, the main event will be the always important Employment Situation Report by the Bureau of Labor Statistics (BLS).

Those two reports will help inform the Fed's next interest rate move, when they meet again on October 27-28. (The Fed's dual mandate, after all, is stable prices (low inflation), and maximum employment.)

The market, of course, will also be watching for any news on the Middle East and the Strait of Hormuz. Indirect talks between the U.S. and Iran took place at Friday's UN General Assembly.

Stocks enter the new week with upside momentum.

Additionally, let me remind, with Q4 set to begin later this week, which is historically the best quarter of the year for stocks (since 1950, the S&P has gone up 79% of the time, with an average gain of 4.1%), not to mention the start of the next earnings season just a couple of weeks away (stocks typically go up during earnings season), the wind is at the bull's back.

And I'm expecting a big rally into the end of the year.

See you tomorrow,