Market Commentary
for the week ending 10/2/2026

The last few days of September and start of October 2026 dragged the stock market slightly lower to start the week, followed by a bounce back on Friday. Last week’s moves were primarily driven by rising bond yields, important inflation data, ongoing geopolitical tensions, and a critical employment report. By the end of the week there was a massive shift in expectations of the Federal Reserve, which sparked a dramatic late-week rally across all the major indices. Despite Friday’s broadly positive finish, only the Nasdaq Composite ended the week with gains.

Fixed-income markets experienced fierce selling pressure early in the week, pushing Treasury bond yields to historic multi-decade highs. The benchmark 10-year U.S. Treasury bond yield surged to an intraday peak of 5.34%, its highest level since 2002. Concurrently, the 30-year bond yield hovered near 5.63%. These soaring borrowing costs initially triggered a stock market sell-off early last week. However, as more data emerged throughout the week (and especially on Friday), yields retreated from their multi-year peaks, allowing equities to recover.

Commodity markets and oil prices remained highly sensitive to escalating tensions in the Middle East. Market anxiety rose after President Donald Trump rejected Iran’s ceasefire proposal and suggested he will resume bombing Iran after the midterm elections, if a deal is not reached by then. This raised fears of severe supply disruptions near the Strait of Hormuz, pushing international benchmark Brent oil past $108 per barrel and WTI crude oil above $96 on Monday. Oil prices moderated later in the week following reports that diplomatic channels remain open and the news that a vital Saudi Arabian pipeline had resumed operations. Additionally, Middle Eastern oil exports have recovered to around their pre-war levels, although refined-product flows remain constrained. Still this news suggests that Iran has lost some of its leverage over the Strait of Hormuz. Then on Friday the G7 leaders announced a coordinated release of 100 million barrels of oil and diesel stocks, beginning immediately and extending over the next four months. WTI crude oil ended the week slightly lower at $91.10 per barrel.

Wednesday began with cooler-than-expected inflation data. The August headline PCE came in at 3.4% vs consensus of 3.7%. Core PCE was 3.0% also lower than the expected 3.3%. This data increased expectations for the Fed to leave rates unchanged at its October meeting, although Treasury yields remained elevated and provided little relief for the broader market as inflation remains firmly above the Fed’s 2.0% target.

On Friday the U.S. Bureau of Labor Statistics revealed that the U.S. economy added a disappointing 29,000 jobs in September, falling well below Wall Street’s expectation of 90,000. The unexpected hiring slowdown accompanied a slight uptick in the unemployment rate from 4.1% to 4.2%. This softer labor market data immediately reshaped expectations for the Federal Reserve’s upcoming policy meeting. Market participants rapidly unwound hawkish bets, and the implied probability of an October interest rate hike collapsed from roughly 64% down to just 22% by Friday afternoon. This dramatic change in the market’s perspective on the Fed took some pressure off bond yields and gave the market a reason to recover.

September was marked by very narrow market leadership. For the month of September, the S&P 500 was down 0.5%, the Dow Jones Industrial average was down 4.3%, while the Nasdaq Composite finished the month with a 1.9% gain. The Russell 2000 (small-caps) also finished lower in September down 5.4%. That divergence reflected one of the defining features of September: strength in mega-cap growth, technology, semiconductors, and AI-related stocks contrasted with considerably weaker performance across much of the broader market. This underscores just how concentrated the market’s September leadership became throughout the month.

Despite macroeconomic headwinds, the technology sector maintained its market leadership last week and outperformed all other sectors, pushing the Nasdaq Composite to a fresh intra-day all-time high on Friday. This showed that the familiar concentration in the market’s largest stocks remained firmly in place. Sector bellwether Nvidia received a boost after Morgan Stanley named it a top semiconductor pick, emphasizing the rising demand for agentic AI. Nvidia further buoyed investor sentiment by expanding its share buyback program by $150 billion. Micron (another semiconductor stock) rose +3% Thursday after the company’s better-than-expected Q4 results and strong Q1 guidance, with enthusiasm surrounding AI-driven memory demand.

Looking ahead to this week, oil prices and interest rates will likely continue to capture Wall Street’s attention.

For the week, the Dow dropped -1.3% to 51,177, the S&P 500 dipped -0.3% to 7,723, while the Nasdaq Composite rose +0.5% to 27,191.

This week Crude oil slipped -1.2% to $91.10/barrel, gold dipped -3.7% to $4,163/oz. and the yield on the Ten-Year Treasury bond surged higher to 5.28%.

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