U.S. equities were mixed last week as investors balanced resilient economic data and continued enthusiasm for artificial intelligence against higher interest rates and geopolitical uncertainty. The S&P 500 declined 0.1%, the Nasdaq Composite gained 0.7%, and the Dow Jones Industrial Average fell 1.7%. Technology shares outperformed, while financial, utility, and other interest-rate-sensitive stocks faced pressure. The Federal Reserve raised its benchmark interest rate by 25 basis points and indicated that another increase may be appropriate if inflation remains elevated. The 10-year Treasury ended the week at 5.00%, up four basis points, while the 2-year yield climbed to 4.74%. Oil remained volatile but finished the week little changed, with West Texas Intermediate crude settling at $100.30 per barrel. Despite last week’s mixed results, year-to-date equity returns remain healthy. We remain constructive on the economy and corporate earnings, but higher borrowing costs, elevated energy prices, and geopolitical risks reinforce the importance of diversification, patience, and remaining focused on long-term investment plans.

U.S. & Global Economy

• The Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00%, its first increase since 2023. Updated projections showed slightly stronger growth and lower unemployment, but also somewhat firmer inflation. Policymakers now expect real GDP to grow 2.3% in 2026, unemployment to end the year at 4.1%, and core PCE inflation to remain at 3.4%. The median projection implies one additional rate increase this year, although future decisions will continue to depend on incoming inflation and employment data.
• U.S. economic data remained mixed but generally consistent with continued growth. Retail sales rebounded 1.2% in August after declining 0.5% in July, while the control group used in GDP calculations increased 1.4%. Initial unemployment claims fell to 196,000, indicating that layoffs remain low. Industrial production was unchanged, however, as manufacturing output declined 0.3% after seven consecutive monthly increases. Housing starts fell 2.6% to an annual rate of 1.275 million units, although single-family construction improved. The data point to a resilient consumer and labor market, but higher interest rates are creating increasing pressure on manufacturing and housing.
• Internationally, the Bank of Japan raised its policy rate by 25 basis points to 1.25%, its highest level since 1995, as inflation remained above its target. China’s industrial production increased by 5.2% from a year earlier, but retail sales growth slowed, and property prices remained weak. The global economy continues to expand, although rising energy costs and tighter monetary policy are producing increasingly uneven results across regions.

Policy and Politics

• The Middle East remains the most immediate geopolitical risk for markets. Oil prices moved sharply during the week following attacks near key shipping routes and disruptions to Saudi Arabia’s East-West pipeline. Prices later retreated as reports indicated that part of the pipeline could resume service. WTI crude finished at $100.30 per barrel, up 0.2% for the week, while Brent declined 0.7% to $103.87. The modest weekly changes mask significant daily volatility and continued uncertainty surrounding the Strait of Hormuz and Bab el-Mandeb. Any sustained disruption could affect energy prices, inflation, consumer spending, and the path of interest rates.
• President Trump signed legislation expanding sanctions against Russia’s energy and defense sectors and targeting the network of vessels used to move sanctioned oil. The law also permits tariffs against major purchasers of Russian energy, potentially widening its effect on global trade. Domestically, the Federal Reserve’s rate increase drew renewed political criticism, placing additional attention on the central bank’s independence. Meanwhile, debate over artificial-intelligence regulation contributed to volatility in technology shares. These developments matter most to investors for their potential effects on energy supplies, trade, inflation, business investment, and confidence, rather than for the political headlines themselves. We remain constructive on AI development and strongly believe the U.S. needs to remain a global leader in the field, rather than allowing another country to dominate the industry.

This week’s economic calendar includes preliminary September business-activity surveys, August durable goods orders, new-home sales, weekly unemployment claims, and the final September reading on consumer sentiment. Investors will also hear from several Federal Reserve officials following last week’s rate increase. International attention will focus on several central bank decisions and the scheduled meeting between Presidents Trump and Xi, with trade policy and geopolitical tensions expected to be key topics. Costco is among the more prominent companies scheduled to report earnings this week.

• Markets are likely to remain sensitive to interest rates, oil prices, and developments in the Middle East. Resilient consumers, low layoffs, healthy corporate earnings, and continued investment in technology provide meaningful support for the economy. At the same time, Treasury yields near 5%, mortgage rates approaching 7%, and oil near $100 per barrel could gradually weigh on demand. Periodic volatility is normal, particularly after strong year-to-date equity 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

• China one-year Loan Prime Rate decision, current rate 3.0%
• U.S. Chicago Fed National Activity Index for August 2026, prior -0.08
• U.S. Richmond Fed Manufacturing Index for September 2026, prior 4
• U.S. S&P Global Manufacturing PMI preliminary reading for September 2026, prior 53.9
• U.S. S&P Global Services PMI preliminary reading for September 2026, prior 56.5
• U.S. S&P Global Composite PMI preliminary reading for September 2026, prior 56.0
• U.S. Current Account for the second quarter of 2026, prior deficit of $226.8 billion
• U.S. Weekly Jobless Claims for September 19, 2026, prior 196K
• U.S. New Home Sales for August 2026, prior 607K
• U.S. Durable Goods Orders for August 2026, prior 1.1%
• U.S. Core Capital Goods Orders for August 2026, prior 0.2%
• University of Michigan Consumer Sentiment, September 2026 final; preliminary 47.8

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