U.S. equities finished lower during the holiday-shortened week despite a strong rebound on Friday. The S&P 500 declined 0.8%, the Nasdaq Composite fell 0.7%, and the Dow Jones Industrial Average lost 1.6%. Rising oil prices, firmer inflation data, and growing expectations for a Federal Reserve rate increase pushed Treasury yields sharply higher, with the 10-year Treasury ending the week at 4.96%, up 18 basis points. Software stocks were volatile as investors reassessed the competitive impact of artificial intelligence, while energy shares benefited from a sharp rise in crude oil prices. Even after last week’s pullback, year-to-date equity returns remain healthy. We remain constructive on the economy and corporate earnings, but higher interest rates and elevated geopolitical risks reinforce the importance of diversification, patience, and remaining focused on long-term investment plans.

Year-to-Date Market Returns (as of September 11, 2026)

U.S. & Global Economy

• Inflation data took center stage last week. The Producer Price Index rose 0.4% in August and 5.4% from a year earlier, while core producer prices increased 0.2% for the month and 4.6% year-over-year. Consumer prices also rose 0.4% in August and remained 3.4% higher than a year ago. Core CPI increased 0.3% for the month but eased to 2.4% year-over-year. Energy costs remain the principal source of renewed inflation pressure, complicating the Federal Reserve’s path even as underlying inflation continues to moderate.
• Other economic data remained generally steady. Initial jobless claims were 206,000, indicating layoffs remain low. The NFIB Small Business Optimism Index declined to 98.7 but remained slightly above its long-term average. Consumer credit increased by $18.1 billion in July, while wholesale inventories rose 1.3% and wholesale sales advanced 0.8%. Together, the data points to continued economic growth, but also suggests that demand remains firm enough to keep the Federal Reserve focused on inflation. Markets now place a high probability on a quarter-point rate increase at this week’s meeting.
• Internationally, the European Central Bank raised its policy rate by 25 basis points to 2.50% as higher energy prices increased inflation concerns. Meanwhile, the United Kingdom economy grew 0.4% in July, supported by services and manufacturing. The global economy continues to show resilience, but rising energy costs are creating a more difficult policy environment for central banks.

Policy and Politics

• The Middle East remains the most immediate geopolitical risk for markets. Iran-aligned Houthi forces expanded their position near the Bab el-Mandeb Strait, while attacks forced Saudi Arabia to temporarily close an important oil pipeline that bypasses the Strait of Hormuz. These developments raised concerns about two of the world’s most important energy-shipping routes. West Texas Intermediate crude rose 9.4% for the week to $100.05 per barrel, while Brent gained 8.7% to $104.61. The White House is considering steps to expand domestic refining capacity, although U.S. refiners are already operating near full utilization.
• The war in Ukraine also remains unresolved, and Congress is considering additional sanctions on Russia and countries that continue to purchase Russian energy. At home, the Federal Reserve’s likely rate increase comes despite continued political pressure for lower rates, placing added attention on the central bank’s independence and Chair Kevin Warsh’s message following Wednesday’s decision. Political developments will continue to generate headlines, but their lasting market impact will depend primarily on how they affect inflation, interest rates, economic growth, and corporate profits.

The Federal Reserve will be the primary focus this week. Investors expect a quarter-point rate increase on Wednesday and will closely review the updated economic projections and Chair Warsh’s press conference for guidance on whether additional tightening may follow. Retail sales, housing starts, industrial production, and weekly jobless claims will provide further insight into consumer demand and the broader economy. The earnings calendar is relatively light, with Lennar, Carnival, Trip.com, and Dave & Buster’s among the companies scheduled to report.

We expect markets to remain sensitive to interest rates and developments in the Middle East, particularly if oil prices stay above $100 per barrel. Even so, the economy continues to grow, consumers remain employed and spending, and corporate earnings remain broadly supportive. Periodic market pullbacks are normal, especially after strong year-to-date gains. We continue to believe investors are best served by remaining diversified, disciplined, and focused on their long-term investment plans rather than reacting to short-term headlines. As always, please contact your team at Valley National Financial Advisors with any questions.

Economic Numbers to Watch This Week

• U.S. Empire State Manufacturing Survey for September 2026, prior 20.6
• Federal Open Market Committee interest-rate decision, current target range 3.50%–3.75%
• U.S. Retail Sales for August 2026, prior -0.6%
• U.S. Import Prices for August 2026, prior -0.4%
• U.S. Manufacturing and Trade Inventories for July 2026, prior 0.0%
• U.S. NAHB Housing Market Index for September 2026, prior 35
• U.S. Housing Starts for August 2026, prior 1.2M
• U.S. Philadelphia Fed Business Outlook Survey for September 2026, prior 47.4
• U.S. Weekly Jobless Claims for September 12, 2026, prior 206K
• U.S. Pending Home Sales for August 2026, prior -2.3%
• U.S. Industrial Production for August 2026, prior 0.2%
• U.S. Capacity Utilization for August 2026, prior 76.3%
• U.S. Leading Economic Index for August 2026, prior 0.2%

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