Stocks hit a record. Bonds hit 2002.

Good morning. The Nasdaq closed at a record 27,477.31 Monday, up 1.1%, and the 10-year Treasury yield closed at 5.31%, its highest close since May 2002 (AP; US Treasury). Two takeovers added fizz: Schneider Electric agreed to buy PTC for $22.6 billion in cash, and C.H. Robinson agreed to buy RXO for $5.8 billion (company releases). A quiet night since: S&P 500 futures are up 0.2%.

Stocks, VIX and yields are Monday's close. Futures, oil and Stoxx 600 as of ~3:40 AM ET Tuesday vs. Monday's settle or close. Crypto as of 3:49 AM ET Tuesday, vs. its 24-hour open. Nikkei is Tuesday's close.

One-line read: A record for the Nasdaq, a 24-year high for the 10-year, and a quiet, slightly green night in between.

The Nasdaq Composite rose 1.1% to a record close Monday, its first since Sept. 22 (Reuters). The same afternoon, the 10-year Treasury yield closed at 5.31%, its highest close since May 2002 (US Treasury; FRED). The stock market heard "AI earnings." The bond market heard "prices paid: 74."

The numbers: Nvidia rose 2.1% to a record close, a market value of $5.76 trillion; Microsoft added 1.5% and Meta 1.9% (Reuters; Yahoo Finance). The S&P 500 rose 0.7% to 7,773.95, about 0.3% below its Aug. 13 record close (Reuters). The 10-year touched 5.349% intraday, and the 30-year touched 5.703%, both their highest since 2002 (CNBC). Analysts expect S&P 500 third-quarter earnings to rise more than 30% from a year ago, largely on AI names (LSEG via Reuters).

Why it matters: If you own an S&P 500 fund, a few AI giants are doing the lifting. The equal-weight version of the index (the RSP fund) is down 3.6% over the past month, while the regular S&P 500 is up 0.7% (CNBC). If you own a bond fund or are shopping for a mortgage, the 10-year sets the tone: Freddie Mac's 30-year average was 7.28% last week, up from 7.03% the week before.

What to watch: Treasury sells $58 billion of 3-year notes at 1 PM ET today, then $39 billion of 10-year notes Wednesday and $22 billion of 30-year bonds Thursday (TreasuryDirect). Those three sales are the week's cleanest read on demand for US debt at these yields.

ISM's services index slipped to 54.9 in September from 55.4, a touch under the 55.2 economists expected, and still its 27th straight month of growth (ISM; Reuters poll). The catch is the prices-paid index: 74.0, up from 72.6 and the highest in more than four years (ISM; Reuters). Hiring perked up, with the employment index at 50.1, back above 50 for the first time in three months. As of Monday's close, CME FedWatch put the odds of an October rate hike at 24%, down from 70% a week earlier (Reuters).

Why it matters: Business input costs are one road to consumer prices, and September CPI lands Oct. 14 (BLS). The Fed's Oct. 28 decision sets what your money-market fund pays.

France's Schneider Electric agreed to buy the Boston-based industrial-software maker for $205 a share in cash, valuing its equity at about $22.6 billion, 42.3% above Friday's close (company release; SEC filing). PTC rose 33.5% to $192.26, and Schneider fell about 10% in Paris (Yahoo Finance). Trucking got the same script: C.H. Robinson agreed to buy transportation broker RXO for $5.8 billion in cash and stock. RXO rose 22.5%; C.H. Robinson fell 10.9% (company release; Reuters; Yahoo Finance).

Why it matters: Takeover premiums are one way index-fund owners get paid. Monday, the buyers' shareholders picked up the tab.

The Nikkei rose 1.1% to 70,683.98 Tuesday, its first close above 70,000 since July 1, led by chip-test maker Advantest, which rose 3.8% to a record close (Yahoo Finance; Nikkei). Europe opened higher too, with the Stoxx 600 up 0.8% early, led by health-care stocks (Yahoo Finance; CNBC). Foxconn, the world's largest contract electronics maker, said third-quarter revenue jumped 47% to $95.4 billion, beating forecasts on AI cloud and networking demand (Reuters). Brent settled Monday at $100.32, down 1.9% and its lowest settle since Sept. 22, and WTI fell 1.8% to $89.43, as Middle East exports rose and the G7 pledged more supply (Dow Jones Market Data; Reuters). Early Tuesday, Brent was at $99.87 and WTI at $88.57 (Yahoo Finance).

Why it matters: Foxconn's sales are a read on the AI server spending behind the Nvidia stake in your S&P 500 fund. And oil feeds inflation, which feeds the 10-year.

The 10-year is back where it was in 2002. For context, it started 2026 at 4.19% and has risen 112 bp since. Notice the two peaks it has now cleared: 5.26% in June 2007 and 4.98% in October 2023. The last close above Monday's 5.31% was 5.32% on May 14, 2002.

Source: FRED DGS10 (via FRED API), data through Oct 2, 2026; Oct 5, 2026 close from US Treasury daily par yield curve (10-yr).

Because the $205 arrives later, and maybe not at all. The companies expect to close by the third quarter of 2027, after a PTC shareholder vote and regulatory approvals (PTC release). Until then, the stock trades below the offer. Wall Street calls the gap the merger-arbitrage spread. Monday it was $12.74, or 6.6% for whoever waits it out. For context, a 1-year Treasury pays 4.47% with no deal risk (US Treasury). The difference is the market's price for "what if regulators say no." A deal spread is a bet that a promise gets kept.

That's the desk. See you tomorrow at 6 AM ET.

— The Overnight Desk Team

Note: The Overnight Desk Team may hold positions in assets discussed. Nothing here is investment advice. · Sponsor: No one paid for any mention in this issue.