Weekly Market Commentary September 28, 2026
Week in Review
Business sentiment surged to multiyear highs while labor market data continued to improve. However, several hard economic indicators have yet to fully confirm the growing optimism, creating an increasingly important question for investors heading into the fourth quarter.
Business Sentiment: Optimism Builds, but Confirmation Is Needed
Preliminary S&P Global Purchasing Managers’ Index (PMI) data offered an unexpectedly strong view of business conditions. Manufacturing PMI rose to 57.0 from 53.9, marking a third consecutive upside surprise and its highest reading in more than four years. Services PMI strengthened to 58.7 from 56.5, reaching a multiyear high. Together, the reports suggest momentum may be broadening across the economy rather than remaining concentrated in one sector.
The strength in services is particularly important given the sector’s outsized contribution to economic activity. However, investors will likely temper their optimism because the reports are preliminary and subject to revision. Final readings will help determine whether September marked a genuine acceleration or an unusually strong initial sample.
Consumer data provided a useful counterweight. The University of Michigan’s Consumer Sentiment and Expectations indexes exceeded forecasts but declined from August, suggesting households remain more cautious than businesses. The divergence does not invalidate the PMI strength, but it indicates the improvement in confidence is not yet uniform across the economy.
Hard Data: Optimism Has Yet to Fully Translate
Housing and capital spending data painted a more measured picture. August’s building permits exceeded expectations (1.403 million versus 1.394 million) but declined from the prior month (1.433 million). The August reading was also broadly consistent with May, suggesting the sharp June decline and July rebound may have reflected monthly noise rather than a clear change in direction.
Core durable goods orders rose by just 0.3% versus the 0.6% expected, signaling that businesses have not yet translated stronger sentiment into equally strong capital spending. The timing of the reports may partly explain the disconnect. Still, markets will want to see hard activity strengthen before concluding that the recent PMI acceleration represents a durable change in momentum.
Labor Market: Claims Point to Greater Stability
Jobless claims remained constructive. Continuing claims fell to 1.730 million, below the 1.780 million forecast, marking a third consecutive better-than-expected reading and extending a broader decline from the summer’s higher levels.
Initial claims also fell below 200,000, while the four-week average declined to 202,250 from approximately 224,000 in June. Weekly fluctuations remain common, but the broader trend suggests layoffs are becoming less frequent and the labor market remains more stable than recent growth concerns might imply.
Week Ahead
This week's economic calendar will provide investors with an important update on the labor market, business sentiment, and inflation. Following last week's strong PMI reports and improving jobless claims data, markets will be looking for confirmation that recent optimism is beginning to translate into broader economic activity.
Labor Market: A Closer Look Beneath the Headline
Labor market data will take center stage this week. Tuesday's Job Openings and Labor Turnover Survey (JOLTS) report will provide additional insight into labor market dynamics, particularly the balance between labor supply and demand. Investors will pay close attention to job openings and the quits rate, as higher voluntary job turnover can indicate workers remain confident in their ability to find new employment opportunities.
The week's most closely watched release will arrive Friday with the September Employment Report. While nonfarm payrolls and the unemployment rate will receive the greatest attention, markets will also monitor measures such as labor force participation and the broader U-6 unemployment rate for clues about the labor market's underlying health. Following recent improvements in jobless claims, investors will be looking to see whether payroll growth continues to support the view that labor conditions remain resilient.
Business Sentiment: Looking for Confirmation
Markets will also receive Institute for Supply Management (ISM) Manufacturing and ISM Services data, providing an opportunity to validate the strong S&P Global PMI readings released last week. Particular attention will be paid to whether the ISM surveys reflect a similar improvement in business sentiment across both sectors of the economy.
Confirmation from the ISM reports would strengthen the case that business confidence is improving more broadly rather than being isolated to a single survey provider.
Inflation: Focus Remains on Core PCE
Wednesday's Core Personal Consumption Expenditures (PCE) report will provide the latest update on inflation trends. Although Core PCE has historically served as the Federal Reserve's preferred inflation measure, investors may place somewhat less emphasis on the report as policymakers have recently referenced a broader range of inflation indicators. Nevertheless, any meaningful surprise could influence expectations surrounding the future path of monetary policy.
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