Stocks finished higher last week, even as Treasury yields climbed to their highest level since 2007. The economy continued to show strength, with growth boosting profits but keeping pressure on inflation and rates. The picture isn’t all rosy, though, as September’s consumer sentiment data showed a decline amid inflation concerns.

 

Here’s how the market finished last week and the stories behind the numbers.

 

Stock Index Performance

• The S&P 500 rose 1.21%.
• The Nasdaq 100 jumped 3.25%.
• The Dow Jones Industrial Average edged up 0.28%.

 

 

Headlines Behind the Numbers

Growth accelerates, and bonds slide. Business activity grew at its fastest pace in more than five years. Bond traders read that strength as a warning about inflation, and the 10-year yield rose above 5.2% late in the week. Traders now see roughly a two-in-three chance that the Federal Reserve raises rates another quarter point in October. Higher yields mean costlier mortgages and car loans, adding strain for households already dealing with higher prices.

 

Prices rise as sentiment falls. Business costs for materials and services are rising at the fastest pace since October 2022, with fuel and freight leading the climb. Companies tend to pass those costs on to customers, and households are feeling the effects. Consumer sentiment fell further, and expected inflation for the coming year jumped to 4.6% from 4.0%. Steady paychecks and rare layoffs keep people spending for now. However, if sentiment continues to slide, that spending could slow.

 

Oil prices ease. West Texas Intermediate (WTI) crude, the U.S. benchmark, settled at $92.41 a barrel, down 7.9% for the week. The drop could help relieve pressure on gas prices but does not resolve the current price problems. Another disruption could push fuel costs back up and give the Fed one more reason to raise rates.

 

 

 

The Week Ahead

Two releases will test whether last week’s concerns deepen or fade. Wednesday’s (September 30th) Personal Consumption Expenditures (PCE) data, the Fed’s preferred inflation gauge, will offer a closer look at whether inflation is softening or remaining sticky. Friday’s (October 2nd) jobs numbers, the first since the Fed raised rates in mid-September, will also provide key data on the economy's health. Softer hiring and wage growth would likely pull yields lower, which would lift bond prices. A hotter reading would likely push yields back up, since investors would expect more Fed hikes.

 

 

 

 

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