Weekly Market Update for October 2, 2026

by Gavyn Jensen-Schneider, Research Associate

Treasury yields continued to climb, though a positive inflation report stemmed some of the bleeding. The S&P 500 finished the week down -0.27%, while the Nasdaq rose +0.45%. The 10-Year Treasury yield, an interest rate indicator, closed at 5.27%, up +10 basis points (bps) from last week. The 6-Month US Treasury, a favorite of our US Treasury strategy, closed at 4.29%, down -7 bps from last week.

Yields on long-dated US Treasuries jumped in September, with the 10-Year rising nearly 50 bps over the course of the month. The sudden move in Treasury rates has centered on sticky inflation and expectations of future interest rate policy. Early this week, markets were pricing in four interest rate hikes through 2026 and 2027 as investors seemed to be growing increasingly worried about inflation.

Commentary from Fed Governors this week has been mixed, with Kashkari, Barr, Logan, and others espousing the hawkish view that more work needs to be done to combat inflation. Members of the FOMC leadership—Vice Chair Jefferson and New York Fed President Williams—expressed more dovish outlooks, suggesting that more time and economic data would be needed to determine the next policy adjustment.

This week’s Core PCE inflation and employment reports give credence to the “wait and see” view. The August Core PCE inflation reading surprised to the downside at 3.0%, 30 bps lower than Wall Street expected, while the September employment report of +29k net new jobs was well below the +90k analysts expected. The unemployment rate, which crept up to 4.2% in September, hasn’t materially changed since March of this year. It remains range-bound between 4.1% and 4.3%, adding more weight to the wait-and-see approach.

Chairman Warsh has repeatedly emphasized that trends in data are more important than any single data point, and trends across inflation and employment have yet to materially change. The 3-month average Core PCE inflation remains at 3.0%, above the Fed’s 2% target, while 3-month net new jobs average remains steady at around +51k. Still, this week’s fresh data points have quelled some market woes, as Fed Funds Futures are pricing in only three hikes as of Friday.

Some additional clarity on the Fed Board’s thinking might arrive in next Wednesday’s release of the FOMC minutes. Quantitative economic data releases will otherwise be limited, with Services PMI on Tuesday and the University of Michigan Consumer Sentiment index on Friday representing the week’s most important prints. Corporate earnings will be similarly quiet as we wait for the big banks to kick off Q3 earnings season on October 13.