Weekly Market Commentary September 21, 2026
Week in Review
Economic data last week continued to show a resilient U.S. economy, although the primary focus was the Federal Reserve's September policy meeting and the inflation outlook. Treasury yields remained elevated throughout the week, with the 10-year Treasury finishing near 5.0% and the 30-year ending around 5.34%, as investors digested the Federal Reserve's 25-basis-point rate increase and updated economic projections.
Wednesday's retail sales report showed consumer spending remained strong despite higher borrowing costs and rising prices. Retail and food services sales increased 1.2% in August after declining 0.5% in July. Sales excluding autos rose 1.4%, suggesting household spending continues to support broader economic growth.
The Federal Reserve subsequently raised the federal funds target range by 25 basis points to 3.75% to 4.00%. Updated economic projections showed policymakers now expect stronger economic growth and somewhat higher inflation than previously anticipated. The median projection for the federal funds rate at year-end also increased, suggesting officials remain focused on returning inflation toward their long-term objective despite continued resilience in the broader economy.
Other economic data were more mixed. Housing starts declined 2.6% in August to a 1.275 million annualized pace, while building permits fell 2.7%, indicating that elevated financing costs continue to weigh on housing activity. Industrial production was unchanged during the month as softer manufacturing output was offset by stronger utility production. Consumer sentiment also weakened in September, with the preliminary University of Michigan Consumer Sentiment Index falling to 47.8 from 51.7 in August. Year-ahead inflation expectations increased to 4.6%, reflecting continued concerns about higher energy prices and broader inflation pressures.
Week Ahead
The economic calendar will be lighter this week following the Federal Reserve meeting, but several reports should provide additional insight into the health of the consumer, housing market, and broader business activity. Markets will continue evaluating whether economic growth remains strong enough to support the Federal Reserve's increasingly firm stance on inflation.
The first major release of the week will be September's preliminary Purchasing Managers' Indexes on Wednesday. The August manufacturing index stood at 53.9, while the services index was 56.5, both indicating continued expansion. Investors will be watching these surveys closely for evidence that higher energy prices and tighter financial conditions are beginning to affect business activity.
Attention will then turn to Thursday's labor market and housing data. Initial jobless claims have remained near historically low levels, highlighting continued labor market strength. August new home sales will also be released Thursday morning and should provide another gauge of housing demand amid elevated mortgage rates and Treasury yields.
Friday's August durable goods orders report will offer additional insight into manufacturing activity and business investment. Investors will also receive the final September reading of the University of Michigan consumer sentiment survey after the preliminary report showed weaker confidence and rising inflation expectations. Together, these releases should provide additional insight into the balance between economic growth and inflation and help shape expectations for the path of interest rates moving forward.
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