RECAPPING LAST WEEK
U.S. equity indices gained ground as investors sorted through a slew of economic reports while
also weighing the implications of Friday’s Supreme Court decision to strike down President
Trump’s sweeping tariffs. The Nasdaq Composite rose 1.5%, while the S&P500 gained 1% and
Russell 2000 added 0.6%. Sector performance was split, with gains in financials, communications,
and industrials offset by weakness in staples, materials, and healthcare. Private equity companies
suffered losses after Blue Owl Capital’s decision to sell $1.4 billion in assets and freeze
redemptions at one of its funds. The moves fueled additional worries about lenders’ exposure to
certain industries like software. Shares of Walmart fell after the company issued a conservative
forecast in its earnings release. In commodities, gold prices edged higher while silver jumped 9%
to $84.25. U.S. Treasury yields rose after a mixed batch of economic data. The long-delayed first
estimate of Q4 2025 GDP came in much lower than expected at +1.4%, decelerating sharply from
the prior quarter’s growth of 4.4%. A pullback in consumer spending and exports, combined with
the government shutdown, were cited as the main reasons for the weaker reading. Another
delayed report showed that U.S. inflation increased more than expected in December. The Core
PCE Price Index rose 0.4% MoM and 3.0% YoY. Minutes from the last FOMC meeting included the
first recent mention of potential rate hikes if inflation remains above the 2% target. Policymakers
remained split over their next move and fed funds futures currently reflect just over 50% chance
of a quarter-point rate cut in June. In other economic news, U.S. business activity continued to
expand this month, albeit at a slowing rate. The S&P Global flash Composite PMI slipped to 52.3
from 53.0, with new orders and employment stalling. The final consumer sentiment reading for
February slipped to 56.6 from an initial estimate of 57.3, with one-year inflation expectations
sitting at 3.4%. The U.S. trade deficit widened in December, leaving the goods shortfall in 2025 at
the highest on record despite higher tariffs on foreign merchandise. Finally, pending sales of
existing homes fell to a record low in January as buyers retreated despite falling mortgage rates
and a slower pace of price increases. Overseas, business growth continued to outpace
expectations in Europe, with Germany’s flash composite PMI rising to 53.1 this month from 52.1.
The manufacturing component rose above the 50 level that represents expansion for the first time
since June 2022. Britain’s inflation rate dropped to 3.0% YoY in January while employment and
wage growth figures softened, strengthening the case for a rate cut in March.
THE WEEK AHEAD
The economic calendar is light this week, leaving investors with more time to ponder the potential
consequences of the U.S. Supreme Court’s momentous decision on tariffs. The big questions will
be whether the government must refund tariff revenue, how much might have to be paid back, and
over what timeframe. The administration’s response to the ruling is a source of uncertainty, along
with how the U.S. would replace the expected future revenue that could have been used to
service its debt. Bond prices may come under pressure as worries resurface over government
finances, which could push longer-term yields higher. The decision could also affect sectors that
derive significant revenue from non-U.S. sales, as well as those sensitive to raw material and
component prices. One of the most important earnings announcements of the season arrives on
Wednesday after market close. Nvidia is expected to report earnings and revenue growth around
70% YoY, but investors are likely to zero in on gross margins and forward guidance. Retailer
Home Depot also reports this week. On the economic calendar, Friday’s Producer Price Index will
be the main release of interest, as a hot reading could weigh on rate cut expectations. Consumer
confidence and factory orders are also on the docket. There are many appearances from FOMC
members this week with opportunities to comment on recent developments. On the international
side, inflation updates in Germany, Japan, and Australia are the releases of note.
(Schwab)
Short-term yields rising
Global equity markets remained remarkably resilient last week despite another sharp rise in interest rates, elevated energy prices, and the first rate hike from the Federal Reserve in more than three years. U.S. equities initially came under pressure following Wednesdays widely anticipated 25 basis point increase in the Fed Funds target rate to 3.75%-4%, but the selloff was relatively short-lived, with most major indices recovering from their knee-jerk response to the rate announcement.
September 24, 2026
