Wall Street experienced a week marked by volatility, with big tech and AI stocks faltering after carrying the market for much of the year. Concerns about overvaluations drove investors from semiconductor and AI shares. The latest inflationary data showed prices moving higher, particularly energy and gasoline. Consumer staples, health care, and energy led the market sectors, while information technology fell 6.60%. Treasury yields declined, mostly in response to a brief rally in equities last Thursday. Geopolitical tensions continued to push energy prices higher.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 10/16
Weekly Change
YTD Change
DJIA
48,063.29
51,654.95
52,002.41
0.67%
8.20%
NASDAQ
23,241.99
27,366.17
26,140.03
-4.48%
12.47%
S&P 500
6,845.50
7,811.54
7,659.44
-1.95%
11.89%
Russell 2000
2,481.91
2,806.98
2,721.37
-3.05%
9.65%
Global Dow
6,169.34
6,906.84
6,985.04
1.13%
13.22%
fed. funds target rate
3.50%-3.75%
3.75%-4.00%
3.75%-4.00%
0 bps
25 bps
10-year Treasuries
4.16%
5.24%
5.10%
-14 bps
94 bps
US Dollar-DXY
98.26
102.22
101.79
-0.42%
3.59%
Crude Oil-CL=F
$57.46
$91.46
$99.02
8.27%
72.33%
Gold-GC=F
$4,323.90
$4,221.60
$4,187.40
-0.81%
-3.16%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
The Consumer Price Index (CPI) rose 0.6% in September and 3.7% over the last 12 months. The CPI rose 0.4% in August and 3.4% since August 2025. Core prices, excluding food and energy, rose 0.3% last month, matching the August increase. Since September 2025, core prices have risen 2.6%. Energy costs rose 5.2% in September, driven by a 9.1% spike in gasoline prices. Energy prices are up 20.4% since September 2025. Shelter costs followed a 0.3% increase in August with a 0.4% advance in September. Food prices were unchanged in September from the prior month.
The Producer Price Index (PPI) increased 1.3% in September, after moving up 0.5% in August and 0.2% in July. The September increase was the largest advance since rising 1.7% in March 2022. The PPI climbed 6.3% for the 12 months ended in September, the largest 12-month increase since December 2022 when the index rose 6.4%. Prices for goods advanced 2.6% in September, the largest increase since data was first calculated in December 2009. Over 80% of the broad-based rise in September was attributable to prices for energy, which jumped 10.8%. Gasoline prices rose 20.3% last month, while prices for food rose 1.2%. Prices for services moved up 0.8% in September, the largest monthly rise since April when prices also advanced 0.8%.
U.S. retail and food services sales increased 0.8% in September from the previous month and 6.3% from September 2025. The largest contributor to the increase in retail sales was a 6.4% advance in sales from gasoline stations. Total retail sales, excluding gasoline stations sales, rose 0.2% last month.
Sales of existing homes increased 1.5% in September but were 2.2% below the pace from a year earlier. In September, unsold inventory represented a supply of 4.8 months at the current sales pace, unchanged from the August estimate but up from 4.5 months a year ago. The median sales price in September was $417,500, down from $427,700 in August but higher than the September 2025 price of $412,300. Sales of existing single-family homes rose 2.0% in September but were down 1.9% from a year earlier. The median existing single-family home price in September was $422,700, well below the August price of $433,600 but higher than the September 2025 price of $417,600.
Import prices increased 1.1% in September following a 0.5% rise in August. Prices for imports rose 8.1% for the 12 months ended September 2026, the largest 12-month advance since import prices increased 8.8% for the year ended July 2022. Import prices for fuel increased 4.8% in September following decreases of 0.2% in August and 6.8% in July. Import prices excluding fuel increased 0.7% in September and have not declined on a monthly basis since August 2025. Prices for exports increased 2.2% in September after rising 1.2% the previous month. Export prices increased 11.6% for the year ended September 2026, the largest over-the-year rise since export prices advanced 12.9% for the 12 months ended July 2022.
Industrial production (IP) increased 0.7% in September after edging up 0.1% in August. Manufacturing output rose 0.3% in September. Mining moved up 0.2%, and utilities increased 3.5%. Total IP in September was 2.2% above its year-earlier level.
For the week ended October 10, there were 199,000 new claims for unemployment insurance, an increase of 1,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended October 3 was 1.1%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended October 3 was 1,710,000, a decrease of 4,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended September 26 were New Jersey (2.0%), Massachusetts (1.8%), Washington (1.8%), California (1.7%), Nevada (1.6%), Puerto Rico (1.6%), Oregon (1.5%), Rhode Island (1.5%), New York (1.4%), Hawaii (1.3%), Illinois (1.3%), and the Virgin Islands (1.3%). The largest increases in initial claims for unemployment insurance for the week ended October 3 were in California (+4,295), Illinois (+1,108), New Jersey (+856), New York (+743), and Texas (+670), while the largest decreases were in Hawaii (-275), Michigan (-146), Iowa (-96), Arizona (-44), and West Virginia (-31).
The national average retail price for regular gasoline was $4.331 per gallon on October 12, $0.023 per gallon below the prior week’s price but $1.270 per gallon higher than a year ago. Also, as of October 12, the East Coast price decreased $0.029 to $4.118 per gallon; the Midwest price rose $0.036 to $4.145 per gallon; the Gulf Coast price decreased $0.060 to $3.851 per gallon; the Rocky Mountain price increased $0.022 to $4.439 per gallon; and the West Coast price ticked down $0.088 to $5.639 per gallon.
Eye on the Week Ahead
This is a very slow week relative to the release of important economic data. However, investors will be looking forward to the last week of October, with particular attention paid to the meeting of the Federal Open Market Committee.
A strong finish on Friday helped U.S. equities close last week on a positive note. Despite the end-of-week rally, stocks experienced significant volatility as investors swayed between optimism over potentially strong corporate earnings versus concerns over elevated Treasury yields and sticky inflation. Nevertheless, benchmark indexes posted notable gains, with the NASDAQ notching its fourth consecutive weekly gain, while the S&P 500 ended a seven-week losing streak. Last week’s performance suggested that the rally extended beyond tech and AI stocks, which had carried the market for the past few weeks. This development was further evidenced by the performance of the market indexes, where gains were noted in all sectors except information technology and industrials. Treasury yields were also volatile last week, reaching their highest levels since 2002, only to fall at the end of the week. Crude oil prices dipped marginally last Friday after President Trump pledged not to attack Iran until after the midterm elections.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 10/9
Weekly Change
YTD Change
DJIA
48,063.29
51,176.96
51,654.95
0.93%
7.47%
NASDAQ
23,241.99
27,190.86
27,366.17
0.64%
17.74%
S&P 500
6,845.50
7,722.72
7,811.54
1.15%
14.11%
Russell 2000
2,481.91
2,832.90
2,806.98
-0.91%
13.10%
Global Dow
6,169.34
6,863.16
6,906.84
0.64%
11.95%
fed. funds target rate
3.50%-3.75%
3.75%-4.00%
3.75%-4.00%
0 bps
25 bps
10-year Treasuries
4.16%
5.28%
5.24%
-4 bps
108 bps
US Dollar-DXY
98.26
101.92
102.22
0.29%
4.03%
Crude Oil-CL=F
$57.46
$91.53
$91.46
-0.08%
59.17%
Gold-GC=F
$4,323.90
$4,171.60
$4,221.60
1.20%
-2.37%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
Business activity in the service sector surged higher in September, rising at the fastest pace in over five years on the strength of a further sharp increase in new orders. Rising demand and improved optimism encouraged firms to take on workers at a rate not seen for over four years. However, the strong growth in the services sector was accompanied by substantial price pressures, with the pace of business cost inflation quickening to the fastest since November 2022.
The goods and services trade deficit was $105.6 billion in August, up $12.7 billion, or 13.7%, from $92.8 billion in July, revised. August exports were $315.2 billion, $4.5 billion, or 1.4%, more than July exports. August imports were $420.8 billion, $17.2 billion, or 4.3%, more than July imports. Year to date, the goods and services deficit decreased $138.2 billion, or 19.9%, from the same period in 2025. Exports increased $267.7 billion, or 11.8%. Imports increased $129.5 billion, or 4.4%.
For the week ended October 3, there were 197,000 new claims for unemployment insurance, a decrease of 2,000 from the previous week’s level, which was revised up by 2,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 26 was 1.1%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 26 was 1,716,000, an increase of 17,000 from the previous week’s level, which was revised down by 2,000. States and territories with the highest insured unemployment rates for the week ended September 19 were New Jersey (2.0%), Washington (1.8%), California (1.7%), Massachusetts (1.7%), Puerto Rico (1.7%), Nevada (1.6%), Oregon (1.5%), Rhode Island (1.5%), New York (1.4%), Illinois (1.3%), and the Virgin Islands (1.3%). The largest increases in initial claims for unemployment insurance for the week ended September 26 were in Michigan (+739), Nevada (+167), Maryland (+105), North Dakota (+26), and Arizona (+19), while the largest decreases were in Hawaii (-1,172), New York (-819), Illinois (-625), Georgia (-543), and Texas (-506).
The national average retail price for regular gasoline was $4.354 per gallon on October 5, $0.111 per gallon below the prior week’s price but $1.230 per gallon higher than a year ago. Also, as of October 5, the East Coast price decreased $0.143 to $4.147 per gallon; the Midwest price fell $0.182 to $4.109 per gallon; the Gulf Coast price decreased $0.013 to $3.911 per gallon; the Rocky Mountain price declined $0.069 to $4.417 per gallon; and the West Coast price ticked up $0.003 to $5.727 per gallon.
Eye on the Week Ahead
The latest inflation data is available this week. The Consumer Price Index for September is available mid-week. August saw prices increase 0.4% for the month and 3.4% over the last 12 months.
Wall Street saw an uptick in volatility last week, resulting in a mixed performance among the major market indexes, despite a Friday rally that reduced the week’s losses. Investors weighed pressure from high Treasury yields and concerns about inflation against optimism that a weakening labor market might forestall another Federal Reserve rate increase. Once again, AI and tech shares did the heavy lifting, while the rest of the market struggled. As a result, the NASDAQ continued to show strength, while the Dow, which is more exposed to interest-rate and economic-growth concerns, declined. Among the market sectors, only information technology, energy, utilities, and industrials advanced, while real estate, health care, and financials fell the furthest. Crude oil prices dipped to under $92.00 per barrel by week’s end as G7 nations announced plans to release crude and diesel reserves to ease surging fuel prices.
Stock Market Indexes
Market/Index
2025 Close
Prior Week
As of 10/2
Weekly Change
YTD Change
DJIA
48,063.29
51,828.62
51,176.96
-1.26%
6.48%
NASDAQ
23,241.99
27,068.72
27,190.86
0.45%
16.99%
S&P 500
6,845.50
7,743.41
7,722.72
-0.27%
12.81%
Russell 2000
2,481.91
2,837.55
2,832.90
-0.16%
14.14%
Global Dow
6,169.34
6,965.09
6,863.16
-1.46%
11.25%
fed. funds target rate
3.50%-3.75%
3.75%-4.00%
3.75%-4.00%
0 bps
25 bps
10-year Treasuries
4.16%
5.18%
5.28%
10 bps
112 bps
US Dollar-DXY
98.26
101.01
101.92
0.90%
3.72%
Crude Oil-CL=F
$57.46
$92.66
$91.53
-1.22%
59.29%
Gold-GC=F
$4,323.90
$4,324.40
$4,171.60
-3.53%
-3.52%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week’s Economic News
Employment rose by 29,000 in September following an average monthly gain of 45,000 over the prior 12 months. The unemployment rate ticked up 0.1% to 4.2%, while the number of unemployed, at 7.1 million, rose by 78,000. The labor force participation rate rose 0.2% to 61.8%, while the employment-population ratio inched up 0.1% to 59.2%. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.9 million in September. The long-term unemployed accounted for 27.1% of all unemployed people. The change in employment for July was revised down by 31,000, from +21,000 to -10,000, and the change for August was revised down by 29,000, from +162,000 to +133,000. With these revisions, employment in July and August combined was 60,000 lower than previously reported. In September, average hourly earnings edged up by $0.05, or 0.1%, to $37.81. Over the past 12 months, average hourly earnings have increased by 3.0%. The average workweek remained at 34.4 hours in September.
Gross domestic product (GDP) increased at an annual rate of 2.2% in the second quarter of 2026, according to the third and final estimate from the Bureau of Economic Analysis. In the first quarter, GDP increased 2.5% (revised). In the second quarter, personal consumption expenditures rose 3.8%. Fixed investment increased 7.7%, primarily due to a 9.0% advance in nonresidential (business) fixed investment. Exports rose 5.0%, while imports, which are a negative in the calculation of GDP, increased 12.6%.
Personal income increased 0.2% in August, according to estimates released by the U.S. Bureau of Economic Analysis. Disposable (after-tax) personal income rose 0.3%, and personal consumption expenditures (PCE), a measure of consumer spending, increased 0.9% in August. From the preceding month, the PCE price index for August increased 0.3%. Excluding food and energy, the PCE price index increased 0.2%. From the same month one year ago, the PCE price index for August increased 3.4%. Excluding food and energy, the PCE price index increased 3.0% from one year ago.
According to the latest Job Openings and Labor Turnover Summary, the number of job openings in August, at 7.1 million, declined by 256,000 from July. Both hires, at 5.2 million, and total separations, at 5.1 million, changed little in August from July. Within separations, quits (3.1 million) were unchanged, while layoffs and discharges (1.6 million) fell 61,000.
The international trade deficit was $132.6 billion in August, up $13.7 billion, or 11.5%, from July. Exports of goods for August were $203.4 billion, $3.7 billion, or 1.9%, more than July exports. Imports of goods for August were $336.1 billion, $17.4 billion, or 5.5%, more than July imports.
Growth of the manufacturing sector rose in September as a notable increase in new orders encouraged firms to raise production and expand employment. The S&P Global US Manufacturing Purchasing Managers’ Index™ surged higher in September, posting 55.9, up from 53.9 in August. Recording well above the critical 50.0 no-change mark, the latest reading was the strongest since May 2022. Growth has now been registered every month since August 2025.
For the week ended September 26, there were 197,000 new claims for unemployment insurance, a decrease of 1,000 from the previous week’s level, which was revised up by 1,000. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended September 19 was 1.1%, unchanged from the prior week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended September 19 was 1,701,000, a decrease of 11,000 from the previous week’s level, which was revised down by 7,000. States and territories with the highest insured unemployment rates for the week ended September 12 were New Jersey (2.1%), Massachusetts (1.8%), Washington (1.8%), California (1.7%), Puerto Rico (1.7%), Nevada (1.6%), Oregon (1.6%), New York (1.5%), Rhode Island (1.5%), and Illinois (1.4%). The largest increases in initial claims for unemployment insurance for the week ended September 19 were in California (+2,352), Hawaii (+1,524), New York (+868), Texas (+768), and Illinois (+738), while the largest decreases were in Massachusetts (-501), Kentucky (-326), Arkansas (-265), Puerto Rico (-124), and Washington (-120).
The national average retail price for regular gasoline was $4.465 per gallon on September 28, $0.013 per gallon below the prior week’s price but $1.347 per gallon higher than a year ago. Also, as of September 28, the East Coast price increased $0.005 to $4.290 per gallon; the Midwest price fell $0.095 to $4.291 per gallon; the Gulf Coast price decreased $0.048 to $3.924 per gallon; the Rocky Mountain price declined $0.024 to $4.486 per gallon; and the West Coast price increased $0.124 to $5.724 per gallon.
Eye on the Week Ahead
There isn’t much in terms of important economic data being released this week. However, the minutes of the last Federal Reserve meeting are available on Wednesday, which could provide some insight into the direction the members plan to take relative to monetary policy.
The Markets (third quarter through September 30, 2026)
The third quarter was a volatile yet generally positive period for Wall Street. The NASDAQ and the S&P 500 each advanced, while the Dow and the small caps of the Russell 2000 lagged. During the third quarter, the major indexes reached record levels in August and early September, although that favorable performance masked an underlying shift to large technology and AI companies, while other sectors largely underperformed. The divergence between benchmark indexes and the broader market indicates that the quarterly market gain was narrowly driven and not representative of the average large company. Overall, the stock market in the third quarter was dominated by large-cap technology and AI stocks, while market breadth deteriorated. Energy was the strongest-performing sector. Treasury yields rose sharply. Higher crude oil prices revived inflation concerns. Corporate earnings remained strong. All of these factors helped create a scenario where growth of major market indexes was not indicative of broader stock market health.
Stock Market Indexes
Market/Index
2025 Close
As of September 30
Monthly Change
Quarterly Change
YTD Change
DJIA
48,063.29
50,906.05
-4.29%
-2.70%
5.91%
NASDAQ
23,241.99
26,861.06
1.86%
2.47%
15.57%
S&P 500
6,845.50
7,651.54
-0.45%
2.03%
11.77%
Russell 2000
2,481.91
2,796.86
-5.40%
-7.52%
12.69%
Global Dow
6,169.34
6,868.61
-2.80%
0.66%
11.33%
fed. funds target rate
3.50%-3.75%
3.75%-4.00%
25 bps
25 bps
25 bps
10-year Treasuries
4.16%
5.29%
54 bps
88 bps
113 bps
US Dollar-DXY
98.26
101.50
2.07%
0.35%
3.30%
Crude Oil-CL=F
$57.46
$90.55
5.07%
29.26%
57.59%
Gold-GC=F
$4,323.90
$4,188.40
-6.86%
4.02%
-3.13%
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Energy, information technology, health care, and communication services were the only market sectors to close Q3 in positive territory. The remaining sectors ended the third quarter in the red, with utilities, industrials, and real estate falling the furthest.
Fixed-income investors faced considerable tumult during the third quarter. Treasury yields rose sharply as markets moved away from expectations of monetary easing toward the likelihood of additional Federal Reserve tightening. Higher oil prices, a somewhat resilient economy, and persistent inflation were the primary factors in the bond selloff. By the end of the third quarter, 10-year Treasury yields had risen about 85.0 basis points, the largest quarterly increase in several years. The increase in bond yields coincided with a drop in bond prices. The increase in bond yields occurred virtually across the entire curve with both two-year and 30-year Treasury yields moving higher.
Third-quarter earnings season has not yet begun in earnest. However, industry analysts continue to evaluate estimates for Q3, while projecting Q4 earnings. That said, FactSet recently indicated that analysts predict the S&P 500 will see a price increase of 20.4% over the next 12 months. At the sector level, all 11 sectors are predicted to see a price increase of more than 10%, led by utilities (+28.0%), consumer discretionary (+26.0%), and industrials (+25.1%). In addition, analysts increased earnings per share (EPS) estimates in aggregate for the third quarter, which is atypical since analysts usually reduce earnings estimates during the first two months of a quarter. Thus, the Q3 revision was considerably more favorable than historical norms.
Gold rebounded somewhat in the third quarter from a notable downturn in Q2. However, investors in the precious metal contended with significant volatility throughout the period. A sharp rally in August was quelled by a September correction, which exemplified the price movement that occurred throughout the third quarter. Gold prices began the quarter at roughly $4,027 per ounce, surged more than 13.0% in August, then gave most of the gain back in September. The result was a quarter characterized by unusually large swings between investment demand, interest rate expectations, the dollar, and geopolitical risk.
Global oil markets tightened considerably in the third quarter with prices increasing by roughly 30.0%. Crude oil prices began the quarter at levels that suggested some stability. However, renewed disruptions in the Middle East, constrained shipping through the Strait of Hormuz, falling inventories, and disruptions to Russian refineries pushed prices notably higher by mid-September. However, prices receded somewhat at the end of the month and quarter amid signs that some disrupted oil flows are returning, while the possibility of a U.S.-Iran diplomatic arrangement reduced the fear of a prolonged supply shortage. Nevertheless, higher crude oil prices affected transportation costs, fuel expenses, and business operating costs. The retail price for regular gasoline was $4.465 per gallon on September 29, $0.394 above the price at the end of August and $1.347 more than the price a year ago.
Despite persistent inflation, high energy costs, tighter financial conditions, and geopolitical tensions, the U.S. economy showed surprising resilience. Gross domestic product held steady at an annualized rate of 2.2% during the quarter. While growth was modest, it exceeded fears of an economic contraction. In particular, consumer spending and business investment were points of strength. Employment growth remained modest, manufacturing output was flat, inflation remained above the Federal Reserve’s 2.0% target, and the housing sector faced affordability and financing constraints.
Inflationary pressures stabilized somewhat in the third quarter. The Consumer Price Index and the personal consumption expenditures (PCE) price index both remained above the Fed’s 2.0% target. Monthly inflation accelerated in August, while core prices (excluding food and energy prices) also ticked higher. Energy prices were an important contributor to inflation during Q3. Energy prices in general, and gasoline prices in particular, rose during the third quarter. Shelter prices appeared to wane in July, only to move higher in August. Food prices were comparatively moderate throughout the summer.
Latest Economic Reports
The following section contains a review of the latest economic data available as of September 30, 2026.
Employment: Job growth exceeded expectations in August as employment rose by 162,000 after increasing 21,000 (revised) in the previous month. The change in employment for June was revised up by 11,000, from 20,000 to 31,000, and the change for July was revised up by 44,000, from -23,000 to +21,000. With these revisions, employment in June and July combined was 55,000 higher than previously reported. The unemployment rate was 4.1% in August, unchanged from the previous month’s rate but 0.2 percentage point lower than the rate from a year earlier. The number of unemployed persons in August was 7.0 million, which was 115,000 more than the total from the previous month and nearly 350,000 above the August 2025 estimate. The number of long-term unemployed (those jobless for 27 weeks or more), at 1.9 million in August, rose 159,000 from the July rate and accounted for 27.0% of all unemployed persons. The total number of long-term unemployed in August was essentially unchanged from a year earlier. The labor force participation rate, at 61.6% in August, was up 0.2 percentage point from the July figure but 0.7 percentage point below the rate from a year earlier. The employment-population ratio in August, at 59.1%, increased 0.2 percentage point from July but was 0.5 percentage point below the August 2025 estimate. In August, average hourly earnings rose by $0.10, or 0.3%, to $37.75. Over the year, average hourly earnings have increased by 3.1%. The average workweek edged up by 0.1 hour to 34.4 hours in August from July.
There were 197,000 initial claims for unemployment insurance for the week ended September 19, 2026. During the same period, the total number of workers receiving unemployment insurance was 1,719,000. The insured unemployment rate was 1.1%, 0.2 percentage point below the rate a year earlier. A year ago, there were 219,000 initial claims, while the total number of workers receiving unemployment insurance was 1,916,000.
FOMC/interest rates: As expected, the Federal Open Market Committee (FOMC) raised the federal funds target rate range by 25.0 basis points to 3.75%-4.00%. The unanimous decision marked the first rate hike in three years. The statement indicated that the rate increase is intended to support a timelier return to the Committee’s 2.0% goal. The Committee noted that inflation remained elevated. While economic activity was solid, domestic spending proved resilient despite elevated uncertainty due to geopolitical developments. Based on projections, it appears that at least one more rate hike is in the offing this year.
GDP/budget: The rate of economic expansion was steady in the second quarter of 2026, with gross domestic product (GDP) rising 2.2%, according to the Bureau of Economic Analysis. In the first quarter, GDP rose 2.5% (revised). Compared to the first quarter, the decrease in GDP in the second quarter reflected decelerations in private investment (7.2% to 4.6%), exports (13.9% to 5.0%), and government spending (+4.7% to -1.0%). Consumer spending accelerated from 0.5% in the first quarter to 3.8% in the second quarter. Imports, which are a negative in the calculation of GDP, rose from 11.5% in the first quarter to 12.6% in the second quarter.
August 2026 saw the federal budget register a deficit of $167 billion following July’s $432 billion deficit. A year earlier, the August deficit was $345 billion. In August, receipts totaled $360 billion, while expenditures were $527 billion. Over the 11 months of the current fiscal year, the government deficit sits at $1,966 billion, $7.7 billion less than the cumulative deficit over the same period of the previous fiscal year. Over the same 11 months, individual income taxes, at $2,548 billion, accounted for more than half of the total receipts of $4,845 billion. Total expenditures for this fiscal year equal $6,811 billion, of which Social Security ($1,526 billion) was the largest outlay.
Inflation/consumer spending: According to the latest Personal Income and Outlays report, personal income rose 0.2% in August, while disposable (after-tax) personal income increased 0.3%. Personal consumption expenditures (PCE) increased 0.9%. Consumer prices, as measured by the PCE price index, increased 0.3% in August. Excluding food and energy, the PCE price index also ticked up 0.2%. From August 2025, the PCE price index rose 3.4%, lower than the increase (3.7%) for the 12 months ended in July. Excluding food and energy, the PCE price index increased 3.0% from August 2025 (3.3% for the year ended in July).
The Consumer Price Index (CPI) advanced 0.4% in August and 3.4% over the last 12 months, unchanged from the 12 months ended in July. Gasoline rose 3.9% in August, accounting for over one third of the overall monthly increase. Energy prices increased 2.1% over the month. Shelter prices rose 0.3% in August after rising 0.1% in July. Prices for food increased 0.1% in August. Prices less food and energy rose 0.3% in August and 2.4% over the year, following a 2.5% increase over the 12 months ended in July. Energy prices increased 16.3% for the 12 months ended August. Prices for food increased 2.7% over the last year.
The latest data reveals that the Producer Price Index increased 0.4% in August, up 0.3 percentage point from the revised July estimate. Producer prices increased 5.4% over the last 12 months. In August, prices for goods rose 1.1% from the previous month. Prices for services increased 0.1% in August. For the year, producer prices for goods rose 7.7%, while prices for services advanced 4.5%. Excluding foods and energy, prices increased 0.2% in August and 4.6% over the year. Excluding foods, energy, and trade services, producer prices moved up 0.3% in August and 4.7% since August 2025.
Housing: Existing home sales decreased 2.0% in August and 1.2% from a year ago. Inventory of existing homes for sale in August, at a 4.9-month supply, was up from the prior month’s estimate of 4.6 months. The median sales price in August was $429,100, down from the July estimate of $436,400 but greater than the August 2025 price of $422,400. Sales of existing single-family homes declined 1.9% in August and 1.1% from August 2025. The median sales price for existing single-family homes in August was $434,800, down from the previous month’s price of $442,500 but higher than the August 2025 price of $427,700. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 7.03% as of September 24. That’s up from 6.30% a year earlier.
The most recent data shows sales of new single-family houses in August 2026 were 6.4% above the July rate but 2.0% below the August 2025 estimate. Inventory sat at a supply of 8.5 months, which was 5.6% under the July rate and unchanged from August 2025. The median sales price of new single-family homes sold in August was $393,700, 0.4% above the July price of $392,200 but 5.8% below the August 2025 price of $417,900. The average sales price of new single-family homes sold in August was $478,700, 9.1% below the July price of $526,400 and 8.8% below the August 2025 price of $525,100.
Manufacturing: Industrial production (IP) was unchanged in August after increasing 0.2% in July. Manufacturing output decreased 0.3% in August. Mining ticked up 0.1% and utilities increased 1.8%. Total IP in August was 1.4% above its year-earlier level.
According to the latest report from the Census Bureau, new orders for durable goods in August were virtually unchanged from the prior month. This followed a 0.9% July increase. Excluding transportation, new orders increased 0.3%. Excluding defense, new orders increased 0.1%. Transportation equipment, down three of the last four months, declined 0.6% in August.
Imports and exports: U.S. import prices increased 0.7% in August following a 0.3% decrease in July. Higher prices for nonfuel imports more than offset lower prices for fuel imports in August. Prices for U.S. exports advanced 0.6% in August after falling 1.4% the previous month. Imports advanced 7.0% for the 12 months ended in August 2026, the largest 12-month increase since the prices rose 7.7% for the 12-month period ended August 2022. Export prices rose 8.6% over the 12-month period ended in August.
The international trade in goods deficit was $132.6 billion in August, up $13.7 billion, or 11.5%, from July. Exports of goods for August were $203.4 billion, $3.7 billion, or 1.9%, less than July exports. Imports of goods for August were $336.1 billion, $17.4 billion, or 5.5%, more than July imports. Since August 2025, exports are up 14.5%, while imports have risen 27.9%.
The latest information on international trade in goods and services, released September 3, 2026, was for July and revealed that the goods and services trade deficit was $88.6 billion, up $17.4 billion, or 24.4%, from the June deficit. July exports were $310.7 billion, $6.6 billion, or 2.1%, less than June exports. July imports were $399.3 billion, $10.8 billion, or 2.8%, more than June imports. Year to date, the goods and services deficit decreased $188.4 billion, or 29.6%, from the same period in 2025. Exports increased $237.2 billion, or 12.0%. Imports increased $48.8 billion, or 1.9%.
International markets: European equity markets began the third quarter of 2026 from a position of strength with several notable indexes nearing or surpassing record highs. However, the third quarter proved volatile with a rotation between cyclical growth, financials, technology, and defensive sectors. Throughout the quarter, European equity markets were sensitive to energy prices, European Central Bank monetary policy, Middle East developments, corporate earnings, and AI/technology performance. Asian equity markets also experienced volatility in the third quarter. Second-quarter momentum waned as technology stocks, particularly semiconductor shares, endured significant corrections. By the end of September, the STOXX Europe 600 Index fell 1.4% for the month and 0.4% for the third quarter; the United Kingdom’s FTSE fell 1.3% from July but increased 1.3% in the third quarter; Japan’s Nikkei 225 Index gained 3.8% for the month but declined 5.3% in Q3; and China’s Shanghai Composite Index dropped 2.5% in August and 6.6% for the quarter.
Consumer confidence: The Consumer Confidence Index fell by 6.7 points to 81.9 in September, down from 88.6 in August. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, retreated 7.9 points to 109.3. The Expectations Index, based on consumers’ short-term outlook for income, business, and labor market conditions, fell 5.9 points to 63.6, marking its third consecutive monthly decline.
Eye on the Quarter Ahead
The Federal Reserve meets at the end of October, the result of which may be another interest rate hike.
