Stocks moved higher last week, but the headline gain masked a more complicated market underneath the surface.
The S&P 500 had a positive week as renewed enthusiasm surrounding artificial intelligence helped technology stocks overcome rising Treasury yields, elevated oil prices and growing expectations for additional Federal Reserve rate hikes.
Economic data added another wrinkle. September’s preliminary manufacturing and services surveys were both substantially stronger than expected, while weekly unemployment claims remained historically low. Strong economic activity supports corporate earnings, but it can also make the Federal Reserve less comfortable that inflation is moving sustainably lower.
The result is a market being pulled in opposite directions: strong growth and earnings continue to support stocks, while higher interest rates and inflation uncertainty create increasingly meaningful headwinds.
🔑 Three Market Takeaways from Last Week
💻 1. Technology Once Again Carried the Market
The S&P 500’s gain looked impressive considering the difficult backdrop, but most of the strength came from technology and artificial-intelligence-related stocks.
The technology sector gained more than 3.5% while the equal-weight S&P 500 declined roughly 0.6%. In other words, the largest technology companies performed much better than the average stock.
Renewed enthusiasm surrounding AI personal assistants helped reinforce expectations for continued spending on semiconductors, memory, networking equipment and data centers.
Strong technology earnings have been an important support for the market throughout 2026. However, increasing dependence on a relatively small group of companies also means broader market participation will remain important to watch.
📊 2. Strong Economic Data Created a New Problem
September’s preliminary economic surveys were substantially stronger than economists expected.
The manufacturing PMI rose to 57.0 and the services PMI reached 58.7, both signaling strong expansion. Measures of businesses’ input costs also increased to their highest levels since 2022.
Meanwhile, weekly unemployment claims fell to only 197,000, another indication that the labor market remains extremely strong.
Strong growth normally helps investors because it supports corporate profits and reduces recession risk. But with inflation still elevated, there can be too much of a good thing.
The stronger the economy remains, the more room the Federal Reserve has to continue raising interest rates in an effort to bring inflation under control.
📈 3. Long-Term Interest Rates Reached Another Milestone
Treasury yields moved sharply higher following the stronger economic reports.
The 10-year Treasury yield finished the week around 5.16%, its highest level since 2007. Rising energy prices, strong growth and expectations for additional Fed rate hikes have all contributed.
Higher yields affect much more than the bond market. They influence mortgage rates, borrowing costs, business investment and how investors value stocks.
Technology earnings have so far been strong enough to offset much of that pressure. The question is how long stocks can continue absorbing higher interest rates if yields remain near current levels.
🧭 Inside Advance & Protect
Each week we explore one principle behind our Advance & Protect philosophy — and how it helps us navigate today’s markets.
Why doesn’t a disciplined investment process change every time the headlines change?
Last week provided a useful example.
Oil prices moved sharply. Treasury yields reached nearly two-decade highs. Economic reports surprised investors. Expectations for Federal Reserve policy changed. Technology stocks rallied.
With that much happening, it can feel as though an investment portfolio should constantly be changing too.
But frequent headlines are not the same thing as a confirmed change in an underlying market trend.
Advance & Protect uses defined indicators designed to distinguish between normal short-term market movement and changes significant enough to warrant an adjustment.
That means there will be weeks when markets are volatile but the underlying indicators do not change. In those situations, remaining disciplined can be just as important as making an adjustment when a signal does change.
Advance & Protect Insight: The goal of a rules-based strategy isn’t to trade more frequently. It is to make changes when the evidence supports them—and avoid making emotional changes when it doesn’t.
👀 This Week: Three Things That Matter Most
👷 1. Friday’s Employment Report
Friday’s September jobs report may be the most important economic release of the week.
Investors would likely welcome continued hiring without another major upside surprise. A moderate report could ease concerns that an extremely tight labor market will contribute to additional inflation.
Another very strong employment report could increase expectations for further Fed rate hikes and put additional upward pressure on Treasury yields.
💵 2. The Fed’s Preferred Inflation Measure
Thursday’s Core PCE Price Index will provide an important update on inflation.
Because inflation remains the primary reason the Federal Reserve has resumed raising interest rates, any evidence that price pressures are improving could help reduce expectations for additional tightening.
A hotter-than-expected reading would likely reinforce concerns that rates may need to remain higher for longer.
🏭 3. More Evidence on the Strength of the Economy
Investors will also receive the ISM Manufacturing Index along with several labor-market reports, including JOLTS job openings, ADP employment, Challenger layoffs and weekly unemployment claims.
After last week’s unusually strong preliminary economic surveys, markets will be watching closely to see whether that strength is confirmed.
The ideal environment for markets remains one in which economic growth continues, but gradually enough to allow inflation and interest rates to move lower.
🧭 Final Thoughts
The market continued to show resilience last week.
Stocks advanced even as Treasury yields reached nearly two-decade highs and investors increased expectations for additional Federal Reserve rate hikes. Strong economic growth and continued optimism around technology earnings were enough to offset those concerns—for now.
At the same time, the gap between technology and the broader market is worth watching, as is the continued rise in long-term interest rates.
Weeks like this also illustrate an important distinction between reacting to market news and responding to a change in the underlying evidence.
A disciplined investment process should be capable of making meaningful adjustments when conditions change—but equally capable of remaining patient when they do not.
Ready to Explore Advance & Protect?
Every investor’s financial situation—and every financial plan—is unique.
If you’d like to learn how our Advance & Protect investment philosophy combines disciplined market analysis with comprehensive financial planning, we’d be happy to schedule a complimentary consultation.
Our goal isn’t simply to help clients pursue investment returns. It’s to provide a thoughtful, evidence-based process designed to help them navigate changing markets while remaining focused on their long-term financial goals.
Markets will always provide reasons for both optimism and concern. A disciplined process can help keep either emotion from becoming the investment strategy.
Warm regards,
The Barzideh & Nadeau Wealth Management Team
Thanks for reading! As always, we’re here to help you navigate these markets with confidence and clarity. Stay safe and informed—see you next week.
