Only AI is holding the market up; minutes are the test

Good morning. A new week begins. Wall Street caught its breath on Friday thanks to the soft jobs report, but look closely and it's an uneasy picture. The Nasdaq is at a record, yet more than three-quarters of S&P 500 stocks sit well below their own highs. As the Wall Street Journal put it, AI is squeezing out the rest of the market.

Interest rates sit behind that concentration. Long-term Treasury yields are at multi-decade highs, and even when hiring weakened, bonds were bought briefly as a haven and then sold. Higher rates are biting in the real economy, too: homeowners locked into 2-3% mortgages are giving up on remodeling because borrowing against their homes is now so expensive, and big-ticket sales at home improvement chains have dropped sharply.

The Middle East isn't quiet either. More tankers were hit in Gulf waters, and Iran repeated that it will reopen the strait only if the US ends its naval blockade and unfreezes assets. The G7's stockpile release pulled oil lower for now, but refining bottlenecks mean the relief may not last.

Three things to watch this week: Wednesday's FOMC minutes, earnings from Delta and PepsiCo, and the tone of Q3 earnings season. The number of companies upbeat on profit outlooks is a record, so expectations are high.