Tue, September 8, 2026
Global equities again traded in a tight range. Interest rate expectations shifted throughout the week but ultimately ended relatively close to where they began. Oil prices rose to a six-week high.
Economic Data
August employment report: Payrolls rose by 162k, well above the consensus of 55k. Payrolls for the prior two months were revised upward by 55k. The unemployment rate remained at 4.1%, while average hourly earnings grew 0.3%. The annualized pace of average hourly earnings was just 2.7% in the three months to August. While the headline number would appear to strengthen the case for an interest rate hike at the September FOMC meeting, the actual probability of a hike remained stable for the week at around 60%. This was likely due to the benign wage growth number. Moreover, the private sector quits rate number released earlier in the week reaffirmed the outlook for muted wage growth. Additionally, this Friday’s CPI report may ultimately carry more weight among committee members.
ISM surveys: Both the ISM manufacturing and services indices remained firmly in expansion territory. The headline manufacturing index dipped slightly, although the production index remained strong, with its three-month average rising at its fastest since early 2022. The headline services index rose from July to August. The prices paid components within both indices remained elevated.
Markets
U.S. Equities
The S&P 500 rose 0.13%. Breadth narrowed as several sectors declined more than 1%. Energy and technology were the best performing sectors. Energy benefitted from higher oil prices while technology was supported by strong earnings reports. The Russell 2000 index of small companies eked out a 0.15% gain.
A few stats of note as we finally wrap up the second quarter earnings season:
- According to LSEG I/B/E/S, S&P 500 earnings growth is estimated to be 52% year-over-year on revenue growth of 15% (as of August 21st).
- Stripping out large mark-to-market gains on the investments of some large tech companies, growth is still estimated to have been around 30%.
- 10 of 11 sectors reported positive earnings growth
- 85% of reporting companies beat earnings estimates while 75% exceeded revenue expectations.
Looking ahead, earnings growth is expected to remain robust for the remainder of 2026, although the second quarter may represent the high-water mark for the current cycle.
International Equities
As in the U.S., both the developed market MSCI EAFE index and the MSCI Emerging Markets index posted modest moves. The same cannot be said for the Japanese yen, which has appreciated more than 4% against the U.S. dollar over the last several days. There has been no official confirmation of another intervention.
Fixed Income
Bond yields moved higher earlier in the week but declined after Federal Reserve Governor Christopher Waller said he was leaning toward keeping rates unchanged at the upcoming FOMC meeting. He cited “considerable improvement” in some of the recent trends, although he mentioned the importance of data that will be released before the September meeting (i.e. Friday’s CPI report).
This Week
Investors will focus on Friday’s August CPI report, the final major data point ahead of next week’s FOMC meeting. The August PPI will be released on Thursday.
Chart of the Week
Diesel crack spreads are approaching all-time highs. The diesel crack spread is the price difference between a barrel of crude oil and a barrel of refined diesel. Due to ongoing disruptions in the Middle East and the war between Russia and Ukraine, global refining capacity has dropped significantly. The spread has widespread implications for transportation costs and heating oil.
Written By Brian Presti
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Brian Presti, CFA®, Chartered SRI Counselor℠, is Chief Investment Officer and a shareholder at TFC Financial Management. He oversees the firm’s investment strategy, asset allocation, sustainable responsible investing, and portfolio management processes and leads the firm’s Investment Committee. Prior to joining TFC in 2023, Brian was Director of Portfolio Strategy at The Colony Group, Chief Investment Officer of Harvest Capital Management and an equity analyst and portfolio manager with DL Carlson Investment Group. He began his career in 1997. As CIO, he is responsible for evaluating investment managers and implementing portfolio strategies designed to support long-term client objectives.