The headline number looked good for Wall Street. The S&P 500, a benchmark of America’s largest listed companies, rose about 1%, ending the week close to a new record. But a closer look reveals that this widely followed index is heavily weighted towards technology giants such as Apple and Microsoft, which helped drive the gains. Beyond the biggest names, a different story emerges.

By contrast, the Russell 2000, which tracks 2,000 smaller US companies, from regional banks to industrial groups, fell 0.91%. By Wednesday, it stood 9% below the record it had set barely two months earlier, close to the 10% decline that investors define as a correction.

The cause was a number that matters to anyone who borrows: the yield on 10-year US government bonds rose above 5.35%, its highest level since 2002. This rate reaches deep into the economy, pushing up borrowing costs for companies and households alike. A technology giant sitting on billions in cash feels the burden far less than a smaller company that relies on borrowing to fund its activities.

The contrast between Wall Street’s record-breaking giants and its struggling smaller players is the story of the week.

Equities. On Thursday, a report showed that OpenAI’s annualised revenue was about USD 20 billion below the USD 70 billion figure that had circulated a week earlier. Despite the news, the Nasdaq Composite ended the week up 0.64%. In Europe, the STOXX 600 finished roughly flat, though French shares fell to a six-month low on Monday.

What it means. Higher rates affect small companies through several mechanisms at once. By some estimates, about a third of the borrowing of Russell 2000 companies carries a floating rate, which resets as rates rise. In addition, around 40% of the index’s companies are not profitable, so they must keep raising new money, which becomes more expensive. At the same time, smaller US firms are more exposed to domestic economic conditions, including American households facing mortgage rates close to 7.5% and higher fuel costs. As if that were not enough, when safe government bonds pay more than 5%, investors have less reason to take risks with shares, and smaller companies are often the first to be left aside.

Rates and credit. The 30-year Treasury yield reached 5.70%, and the average 30-year US mortgage rate jumped from 7.30% to 7.49% in a single week. The minutes of the Fed’s September meeting, published on Wednesday, showed that most officials see another rate rise before year-end as possibly appropriate.

What it means. Long-term yields rise when lenders want to be paid more for tying up their money. Three forces are at work: inflation lifted by oil prices, heavy government borrowing, and large tech companies borrowing to build AI infrastructure. For small companies, these yields set the price of every loan they will need to refinance.

Currencies. The euro fell to USD 1.1161 on Monday, its lowest level in 17 months, and headed for a fifth weekly decline, weighed down by France’s debt worries. Euro-area inflation rose to 3.8% in September, without much help for the single currency.

What it means. A currency reflects confidence as much as interest rates. Higher inflation would normally support the euro, because it makes higher rates from the European Central Bank more likely. However, doubts about France’s public finances outweigh this argument.

Commodities. Brent crude stayed above USD 100 a barrel for most of the week, before slipping on Friday after President Trump promised that the United States would not attack Iran before the midterm elections. Gold rose 1.2% to about USD 4,220 an ounce, and copper gained 1.9%.

What it means. Expensive oil is another burden for small firms. Fuel and transport costs rise, and smaller companies have less power than giants to pass them on to customers.

The week ahead. On Tuesday, the big US banks publish their third-quarter results. On Wednesday, the September inflation figures will show whether prices are still running too hot for the Fed.

What it means. Banks will show whether borrowers, including smaller companies, are starting to struggle to repay. A hot inflation reading would make another rate rise more likely, and add to the pressure on small caps.

See you next Monday for the next chapter of the story.