In the coming week, investors will focus on studying the minutes of the Federal Reserve's September meeting and the US September services sector economic data to assess the likelihood of maintaining high interest rates and pausing rate hikes. This could reshape the valuation of US technology stocks and the direction of US Treasury yields in the short term. Major US stock indices have recently been fluctuating at relatively high levels, with the Nasdaq and S&P 500 continuing to show resilience supported by AI computing power and semiconductor technology stocks. Following the significantly dovish September non-farm payroll data, market risk appetite quickly recovered, leading to a short-term rise in US stock futures, with funds further trading on the main theme of a "soft landing for the US economy and a steady decline in inflation." The minutes of the Federal Reserve's September monetary policy meeting will be released next Wednesday, and this is the primary focus for the market next week. Simultaneously, the September ISM non-manufacturing PMI and the Michigan Consumer Inflation Expectations, two leading inflation indicators, will also be closely watched. Investors will ultimately confirm the Fed's subsequent interest rate path through the hawkish/dovey language in the policy minutes, changes in service sector activity, and inflation expectations. After the Fed raised interest rates by 25 basis points as expected in September, the current policy focus has shifted from "continuous rate hikes" to "maintaining high interest rates in the long term" to address the complex situation of coexisting structural AI inflation, energy geopolitical shocks, and cooling endogenous wage inflation. A senior chief investment officer of a Wall Street macro hedge fund stated, "When you calmly examine the current market focus, the Fed's interest rate expectations and inflation stickiness are undoubtedly paramount. The meeting minutes and service sector inflation data will directly reflect the Fed officials' trade-offs regarding cooling wages, resilient demand, and structural inflation, serving as the core anchor for the market's future direction."

The problems in the bond market—and the underlying dynamics of the market.

Despite marginal cooling of inflation and a slowdown in employment, long-term US Treasury yields remained volatile at high levels, with the high term premium continuing to suppress capital markets, leading to a cautious stabilization in the bond market. The 10-year US Treasury yield had previously held steady at high levels, pricing in the core expectation of "high interest rates persisting in the long term." A chief market strategist at a New York investment bank stated in a report, "Given the repricing of inflation risks and rising neutral interest rates in the fixed income market over the past few months, the risk of repeated fluctuations in long-term yields and rapid market adjustments remains." Even with cooling wage inflation, uncertainties surrounding energy and geopolitics, and structural inflation from AI capital expenditures, continue to prevent yields from falling rapidly. The stock market sector structure continues to diverge. This month, AI technology and memory semiconductor sectors led the market, becoming the core support for the index's resilience, but traditional cyclical and value sectors performed weakly, raising concerns about a structural market trend. The S&P 500 index, supported by leading technology stocks, has shown strong overall resilience, with its year-to-date gains continuing to expand; however, most of its 11 industry sectors have been weak, and the S&P 500 equal-weighted index has underperformed the weighted index, reflecting the strong structural characteristics of this market rally. In this round, AI computing power and AI infrastructure have continued to be the core themes of the market, with AI leaders such as Nvidia, Microsoft, and Google continuing to dominate the market. Tech giants have successively launched new-generation AI models and capital expenditure plans, continuously reshaping the market's understanding of supply-side efficiency and structural inflation.

Key data and events are about to be released, and the policy path will be validated.

The latest September non-farm payroll report presents a typical cooling but not recessionary pattern: the US added only 26,000 non-farm jobs in September, far below the expected 90,000; the unemployment rate rose to 4.2%, and average hourly earnings fell year-on-year to 3.0%, significantly easing inflationary pressures. However, considering seasonal adjustment patterns, last August's non-farm payrolls were abnormally high, and this month's was slightly revised downwards. This significant decline in employment is more of a mean reversion, coupled with the strong resilience of previous employment data, indicating that the underlying support of the US labor market has not collapsed. A co-chief investment officer of an asset management firm analyzed that "the current labor market is showing characteristics of a moderate and orderly cooling, with a slight weakening of employment and a continued decline in wages, which is conducive to suppressing service inflation; however, demand remains resilient, and the probability of a soft landing for the economy has greatly increased, making this the most favorable combination for the capital market at present." Last month's relatively strong non-farm payrolls, coupled with a rebound in manufacturing input prices, once strengthened market expectations for continued high interest rates from the Federal Reserve. The Federal Reserve raised interest rates by 25 basis points at its September meeting and hinted that it would flexibly adjust the pace of subsequent policy based on inflation and employment data. Data shows that current federal funds futures indicate a significant decrease in the probability of another Fed rate hike this year, with market consensus pricing in a wait-and-see approach to high interest rates. Strategists stated that "the market will be satisfied with the combination of data showing a moderate cooling of employment, a steady decline in inflation, and a resilient economy. If next week's service sector data shows a further cooling and inflation expectations decline, it will further solidify expectations that high interest rates have peaked; conversely, if service sector inflation stickiness exceeds expectations, it will trigger a rebound in market tightening expectations, suppressing the valuation of technology growth stocks." The high-interest-rate environment has long put multiple pressures on US growth stocks: continuously raising corporate financing costs, suppressing long-term earnings valuations, and simultaneously pushing up risk-free yields, exacerbating the seesaw effect between stocks and bonds. The current cooling of wage inflation is gradually alleviating this pressure, providing room for valuation repair in AI technology stocks. The Fed's key focus areas, service sector inflation and household inflation expectations, will be updated next week. Although wage inflation has declined previously, structural investments in AI and geopolitical energy disturbances still pose a persistent inflationary risk. Analysts indicate that next week's data will likely confirm a marginal cooling of overall inflation, but structural stickiness will persist. If the services PMI and consumer inflation expectations continue to decline, it will further open up room for recovery in risky assets.