For the week ending 16 October 2026
As of midday Friday, global equities were lower on the week as AI-related credit jitters and advances in memory technology undermined leading AI stocks. The yield on the US 10-year Treasury note fell 14 basis points to 5.11% as many investors upped bond allocations. The price of a barrel of West Texas Intermediate crude oil rose $6.50 as Iran upped the pace of their attacks on shipping in the Strait of Hormuz, while volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 17.7 from 17.3 a week ago.
MACRO NEWS
Inflation concerns amplified by September readings
US inflation ran hotter than expected in September. Core consumer prices rose 0.3% during the month and 2.6% from a year earlier, while headline inflation increased 0.6% during the month and 3.7% from a year earlier. The increase in core prices was broad based, which made it harder to dismiss the surprise as just the result of a few volatile categories.
Producer prices added to the concern. The PPI rose 1.3% in September, more than twice the consensus forecast, and core producer prices increased 0.5%. Treasury yields spiked after Wednesday’s CPI data but counterintuitively reversed and headed lower as the day wore on. Yields fell further after Thursday’s hot PPI data as investors appear to be rotating away from equities, taking advantage of some of the highest bond yields in years. The rotation has been particularly sharp from AI-linked equities amid rising overinvestment concerns. More on that theme below.
Immediately after the CPI report, odds of rate hike from the Federal Reserve toward the end of this month rose to about 50% from about 22% before but have since receded to only 14% after Fed Chair Kevin Warsh expressed no sense of urgency regarding the need to tighten in remarks early Friday.
AI financing concerns build
Investor scrutiny of the AI investment boom increased this week as signs of stress emerged in debt and credit markets. Global AI-related debt issuance fell to $23 billion in September, less than half the prior month’s level and well below the record $113 billion raised in June. In the US investment-grade market, AI-related bond issuance came to a halt in September after blue-chip technology companies borrowed about $306 billion between January and August.
Credit markets also showed greater concern about companies tied to AI infrastructure. Five-year credit default swap spreads widened sharply for Oracle, SoftBank, and neocloud provider CoreWeave. At the same time, Chinese memory-chip maker CXMT announced a technology breakthrough that pressured shares of established producers, including Samsung, SK Hynix, and Micron. Adding to concerns was news that despite Anthropic’s revenue increasing nearly 50% from the prior quarter, its growth rate was slower than anticipated. Pressure on CoreWeave was intense enough to prompt NVIDIA CEO Jensen Huang to publicly defend the firm, saying it doesn’t need to be backstopped by NVIDIA. Returning to Anthropic, investors are reportedly lowering expectations for the company’s IPO valuation from $2 trillion to $1.5 trillion.
The developments come as investors increasingly question the pace and returns of AI investment. Higher interest rates have added to those concerns, contributing to pressure on AI-related stocks.
Zelensky says Ukraine to resume Russian refinery attacks
After observing a one-sided, three-day ceasefire on Russian refineries, Ukrainian President Volodymyr Zelensky said his country would resume attacking Russia’s energy infrastructure. US President Donald Trump earlier this week announced that Russia and Ukraine had agreed to such a ceasefire, but Russia had continued to attack Ukraine’s power grid regardless.
President Trump received harsh pushback from members of Congress on both sides of the aisle for his plan to import Russian diesel fuel, as well as on the apparent throttling of the Ukrainian military’s access to Starlink connectivity provided by the Pentagon.
QUICK HITS
US retail sales rose a stronger-than-expected 0.8% in September, though core sales, which strip sales of things such as gasoline and building materials, rose just 0.1%.
Investors added almost $14 billion to US government bond funds in early October after record third-quarter inflows of $59.3 billion.
US industrial production rose 0.7% in September, beating estimates for a 0.4% rise.
The IMF raised its 2026 global growth forecast slightly to 3.1% but maintained its 2027 forecast at 3.4%. The IMF expects AI investment to support growth next year but warned that energy pressures and financial risks are testing the global economy’s resilience.
The National Retail Federation expects US holiday sales to grow 4.2% year over year.
The Fed’s Beige Book reported robust or intensifying price pressures in half of the Fed’s districts, although most districts maintained a positive economic outlook.
The Russell 2000 entered a correction as higher interest rates pressured smaller companies.
China reported a record $133.5 billion trade surplus in September, supported by global demand for AI-related equipment.
US existing home sales rose 1.5% in September, beating expectations for a 0.8% decline. The median home price increased 1.3% to $417,500.
China’s credit to the nonfinancial sector exceeded 300% of GDP last year, 60 percentage points higher than at the end of 2019.
Fitch Ratings said France’s A+ credit rating is under pressure from rising government debt, weak growth, and political instability.
European Central Bank President Christine Lagarde said France must find a domestic solution to its budget difficulties and played down the prospect of an intervention by the ECB.
Qatar’s liquefied natural gas exports recovered to nearly one-third of prewar levels by the end of September, helping stabilize global gas supplies.
US Central Command rejected Iran’s claim that it controls the Strait of Hormuz, saying that US forces and regional partners helped move more than 19 million barrels of crude through the strait on Monday.
Iran has reportedly adopted new tactics to increase tanker attacks ahead of the US midterm elections.
President Trump said oil, gas, and mineral exploration are set to begin in Greenland.
President Trump said Taiwan agreed to buy $70–$80 billion of Alaskan natural gas and invest $4.4 billion in a pipeline.
Nearly 72 million US Social Security recipients will receive a 3.6% cost-of-living adjustment in 2027.
Reuters reported that Christine Lagarde could be appointed chair of the World Economic Forum as soon as November.
As part of a plan to cut its trade deficit with China, the European Union is preparing to create new trade powers that could completely shut off China’s access to its single market.
THE WEEK AHEAD
Monday: Canada CPI
Tuesday: UK unemployment; US housing starts, pending home sales
Wednesday: UK CPI
Thursday: US initial jobless claims
Friday: Global preliminary purchasing managers’ indices
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your investment professional, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.
The views expressed in this article are those of MFS and are subject to change at any time. No forecasts can be guaranteed.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.
AUTHOR
Jamie Coleman
Senior Strategist,
Strategy and Insights Group