The Markets (as of market close October 2, 2026)
Wall Street experienced a more volatile week as stock traders weighed rising Treasury yields and persistent inflation concerns against signs of a cooling labor market. Major indexes finished mixed despite a Friday rally that helped recover some earlier losses. The NASDAQ gained 0.5% for the week, while the S&P 500 declined 0.3% and the Dow fell 1.3%. Small-cap stocks also edged lower.
Technology and artificial intelligence-related shares once again provided much of the market’s strength, while more interest-rate-sensitive areas struggled. Information technology, energy, utilities, and industrials were the only major sectors to finish the week higher, while real estate, health care, and financials posted some of the largest declines.
Treasury yields continued to move higher, with the 10-year Treasury yield rising 10 basis points to 5.28%. Stock market watchers continued to assess whether signs of a softer labor market could reduce the likelihood of additional Federal Reserve rate increases. Crude oil prices declined to $91.53 per barrel after the G7 nations announced plans to release crude oil and diesel reserves to ease elevated fuel prices.
Last Week’s Economic News
- The September employment report pointed to continued cooling in the labor market. Employers added 29,000 jobs during the month, well below the average monthly gain of 45,000 over the previous 12 months. The unemployment rate increased slightly to 4.2%, while the number of unemployed people rose to 7.1 million. July and August payroll gains were also revised lower by a combined 60,000 jobs. Average hourly earnings increased 0.1% in September and were 3.0% higher than a year earlier.
- Economic growth remained positive during the second quarter. According to the final estimate from the Bureau of Economic Analysis, gross domestic product increased at an annual rate of 2.2%, compared with revised growth of 2.5% in the first quarter. Consumer spending increased 3.8%, while fixed investment rose 7.7%, supported by continued strength in business investment.
- Consumer spending remained strong in August. Personal income increased slightly, disposable personal income rose, and personal consumption expenditures increased. The Personal Consumption Expenditures Price Index rose for the month and 3.4% from a year earlier. Excluding food and energy, the index increased in August and 3.0% over the past 12 months, indicating that inflation remained above the Federal Reserve’s long-term target.
- Additional labor-market data also showed signs of moderation. Job openings declined to 7.1 million in August, down 256,000 from July, while hiring and total separations changed little. Initial unemployment claims totaled 197,000 for the week ended September 26, down slightly from the previous week.
- Manufacturing activity strengthened in September. The S&P Global U.S. Manufacturing Purchasing Managers’ Index rose in August, its strongest reading since May 2022. Growth in new orders supported higher production and increased employment across the sector.
- The U.S. goods trade deficit widened in August as imports grew faster than exports. The deficit increased 11.5% to $132.6 billion. Exports rose 1.9% from July, while imports increased 5.5%.
- Gasoline prices remained elevated but declined slightly nationally.
Eye on the Week Ahead
The economic calendar is relatively light this week, placing greater attention on the Federal Reserve. Minutes from the Fed’s most recent policy meeting are scheduled for release on Wednesday and could provide additional insight into how policymakers are weighing persistent inflation against signs of a slowing labor market.
Stock market watchers will be looking closely.
Have a nice week!
Sincerely,
Robert G. Carpenter