Welcome to Markets Desk, your midday read on what's moving and why.
Small caps are holding up better than the headlines suggest. The Russell two thousand led the broad market lower on Friday, but zoom out and the picture changes — the index has outperformed every major benchmark except the Nasdaq so far in two thousand twenty six. The question now is whether that resilience has a ceiling, with rate sensitivity and tighter credit conditions still lurking as headwinds for smaller, more leveraged companies.
Shifting to the intersection of artificial intelligence and national security, a striking story out of Fortune this week details how Anthropic refused to allow the Pentagon to deploy Claude, its flagship AI model, for Defense Department use. The move is drawing serious scrutiny from former regulators who see it as a troubling signal of how much leverage large AI companies now exercise over government policy — and how little framework exists to check it.
And a note this morning on the passing of Edmund Phelps, the Nobel laureate whose work on the natural rate of unemployment and expectations-augmented Phillips curve reshaped how central banks think about inflation and labor markets. His intellectual fingerprints are on nearly every serious macro policy debate of the last half century, and the field is genuinely smaller without him.
That's the tape. Markets Desk, signing off the floor.
