October 19, 2026

A broad selloff in technology stocks pushed the market lower once again on Friday, which was the Nasdaq end its worst week since June.

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The S&P declined by 1.1% to end at 7659, while the Nasdaq sank by 2.1% and posted its first weekly loss in five weeks and its worst since late June.

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The Dow did better for the week and lost 0.3% to 52,002 and it was held up by gains in energy, some healthcare and a few retailers like WMT.

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All but seven of the 75 stocks in the tech sector closed lower and the worst of the group were chip companies, and this reflected mounting worries about how long the frenzy over the AI buildout will last.

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As an example, AMD, INTC, AVGO, META, MU, GOOG, CRWV, all sold off by more than 5%, the latter by 30% and its bond yields rose to 15%. In other words, but the capex cycle being funded out of debt rather than simply free cash flow, the credit cycle is reflecting that.

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A massive amount of capital will be needed for the AI buildout, and higher rates and wider credit spreads will make it more difficult for companies to deal with the credit markets.

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AI is also looking to equity markets, as OpenAI and Anthropic both looking forward to going public, and the latter added revenue by 45% in the third quarter over the second quarter, but this is lower than triple digit gains in the second quarter over the first one.

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The semiconductors have been terrible lately as their main index fell for nine straight sessions and has fallen by 16%, but on the other hand, the index itself its higher by 60% so far in 2026. In the meantime, the poorly performing consumer staples sector actually had the nerve to go higher with NKE, CAVA and Charter gaining around 5%. One can see the rotation going on at the moment and the question is whether or not it will continue this way going forward.

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Third-quarter earnings reports are now increasing in intensity this week with 70 S&P reports and the following lineup: Tuesday – Dow component 3M plus Alaska Air, BRL, GM, NFLX and UAL; Wednesday – T, META, TSLA, TXN, CSX, LRCX and NEE; Thursday – Dow component PG plus LMT, AAL, UNP and VLO; Friday – Dow component AXP plus SLB.

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Economic reports will have: Thursday – pending home sales for September; Friday – Manufacturer’s and Services Purchasing Managers Index.

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In late February, would-be home buyers and sellers rejoiced.

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For the first time in more than three years, the average interest on a 30-year fixed-rate mortgage had fallen under 6%. Finally, it seemed, the languid housing market might perk up.

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But that glimmer of hope has flamed out.

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Mortgage rates have rocketed back up, coming in at 7.4%  as of Thursday. And it appears unlikely that rates will decline significantly anytime soon. Mortgage rates are tied to the yield on the 10-year Treasury note, which has risen because of concerns about persistent inflation, ballooning national debt and optimism around growth driven by artificial intelligence.

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The surge in mortgage rates could further depress housing activity and plunge the country deeper into a housing crisis. The United States had 3.7 million fewer homes than it needed in late 2024, according to Freddie Mac.

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Homeowners who secured ultralow mortgages during the pandemic, when borrowing costs plummeted, will be less willing to move, limiting already sluggish sales. Prospective buyers might now live with their parents or remain renters, pushing up rents. Builders could be more reluctant to invest in construction, exacerbating a national housing shortage.

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The era of rock-bottom mortgage rates may be over, but higher rates are historically more common. During the 1980s, the average interest on a 30-year fixed-rate mortgage surpassed 18 percent. The difference now is that home prices are sky-high as well, a combination that is putting home buying out of reach for many Americans, especially first-time purchasers.

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Owning a home is as unaffordable as it was in the years before the financial crisis, looking at the median household income and the median home price.

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The result is that more people could remain in the rental market, which means an increase in the pool of renters, combined with slower construction of apartment buildings, could push up rents.

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Rents have risen modestly in recent years, but they could start to accelerate in a year or two. Rents have been stable because there was all this new construction of apartments during the pandemic that added to inventory.

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Higher rents could lift overall inflation, which could be a challenge for the Federal Reserve as it tries to hold down persistent price increases.

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Another way higher mortgage rates could dampen housing is by curtailing the housing supply. The home building sector has been languishing for years because of labor shortages, rising material prices brought on by supply chain trouble and tariffs, regulatory hurdles and a lack of land.

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As mortgage rates rise, home builders will have to weigh the cost of construction with the likelihood that their homes will find ready buyers. Many home builders have had to offer concessions to entice potential homeowners, including price cuts, which decrease their profit. Builders are also facing higher borrowing costs, making financing their projects more expensive.

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The National Association of Home Builders forecasts that single-family home building will decline by 4 percent this year and another 3 percent next year. Multifamily construction will also fall.

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In addition to reducing prices, it is advertising duplexes, triplexes and townhouses before they are finished in an attempt to sell them quickly and avoid paying carrying costs like heating and electric bills.

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A slowdown in building raises the possibility that there will not be enough houses later if mortgage rates fall, even slightly, and buyers rush back into the housing market. That could drive up housing prices and make it even harder to buy a home.

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Earlier this year, Congress passed a bill that aims to make it easier and cheaper for developers to build houses. The measure, which became law in July, could make housing more affordable in the long term.

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Fed officials will be watching how much the housing market and home building slow in response to higher rates. Housing, while highly sensitive to interest rates, may not have much room to slacken given its already slow pace. That could make it harder for the Fed to bring inflation back to its 2 percent target. The Fed, which increased rates by a quarter of a percentage point last month, is expected to raise rates at least once more in the coming months.

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One question is whether sellers will reduce prices to woo buyers while rates are high, which could improve the number of sales. Home prices nationally were up 1.9 percent in July from the year earlier, slightly faster than the previous month, according to a widely followed index from S&P.

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Home prices actually rise during periods of high interest rates because they are correlated with a stronger economy and higher inflation.

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The housing market has been less susceptible to interest rate hikes because the housing shortage prevents prices from falling considerably. After the Fed started raising interest rates in 2022 in response to skyrocketing inflation, housing prices did not drop as much as they might have because demand for homes outweighed supply.

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As a result, the housing market should only marginally worsen as long as interest rates do not climb much higher. Maybe it doesn’t weaken a lot more, but it certainly would be somewhat weaker tomorrow than it is today.