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October 5, 2026
Good afternoon,
Markets
For the week ending 10/2/2026:
- The S&P 500 decreased 0.3% to close at 7,722.72.
- The yield of the 10-year Treasury bond increased from 5.18% to 5.28%.
- Oil decreased from $92.41 to $91.11.
- The CBOE Volatility Index (VIX) increased from 14.87 to 15.31.
- U.S. dollar currency exchange rates were:
- EUR/USD: 1.13 (USD stronger from a week ago)
- GBP/USD: 1.32 (USD stronger from a week ago)
- USD/JPY: 157.93 (USD weaker from a week ago)
Market Headlines
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Inflation Cools: Wednesday's PCE inflation report showed cooler-than-expected price growth. Headline PCE inflation increased 3.4% year-over-year in August, 0.3 percentage points below economists' expectations of 3.7%. Core PCE inflation, which excludes food and energy, rose 0.2% during the month, below the 0.3% increase that had been expected. Additionally, the three-month annualized core PCE inflation rate slowed to 2.0%, reaching the Federal Reserve's inflation target for the first time in more than two years.
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Mortgage Rates Spike: Mortgage rates climbed to their highest level in nearly three years last week, with the 30-year fixed rate rising to 7.28%. This marked the sixth consecutive week of increases and the largest weekly jump in about four years. The sharp rise was driven by higher Treasury yields, as sticky inflation and expectations for additional Fed rate hikes continued to push borrowing costs higher.
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Jobs Market Slows: Friday’s jobs report showed the U.S. economy added just 29,000 jobs, well below economists’ expectations of 80,000–90,000. Previous months’ job gains were also revised lower, while the unemployment rate unexpectedly rose to 4.2% from 4.1%. Stocks closed higher Friday as investors viewed signs of a cooling labor market as a potential reason for the Fed to hold interest rates steady at its October meeting, rather than implement another rate hike.
Key Takeaway
Following cooler-than-expected inflation data and signs of a weakening labor market, investors are now expecting the Federal Reserve to leave interest rates unchanged at its October meeting. According to CME FedWatch, futures markets were pricing in a 79% probability of rates remaining unchanged as of Friday, compared with a 64% probability of a hike before last week’s economic data. Additionally, comments from New York Fed President John Williams and Vice Chair Philip Jefferson indicated little urgency to tighten policy immediately, further pushing expectations away from the October 27–28 FOMC meeting. While an October pause is now heavily priced in, investors continue to watch for a potential rate increase later in the year, particularly at the December meeting. As a result, incoming inflation and employment data over the next several months will continue to play a significant role in shaping expectations for the Fed’s year-end policy decisions.
The Week Ahead: October 5 – 9
- Monday: ISM nonmanufacturing index
- Tuesday: Trade balance
- Wednesday: Consumer credit, Release of minutes from September 15-16 Fed Reserve meeting
- Thursday: Initial jobless claims, Wholesale inventories
- Friday: Consumer sentiment
Until next week,
Weller Financial Group
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