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Markets rose as bond yields halted their ascent and energy prices stabilised.

For the week, the S&P 500 Index rose 1.2%, the Dow Jones Industrial Average gained 1%, and the NASDAQ 100 advanced 0.3%. The consumer staples, utilities, and energy sectors led the S&P 500 Index for the week, while industrials, technology, and communication services lagged.

The 10-year U.S. Treasury note yield ended Friday at 5.241%, down from 5.278% the previous week.

Gasoline prices, as measured by AAA, declined 0.2% for the week to $4.3585 per gallon and diesel fuel prices fell 1% to $6.2771 per gallon. Fuel prices have been a significant contributor to headline inflation. We get an update on September inflation when the Consumer Price Index (CPI) and Producer Price Index (PPI) are released later this week.

CME fed funds futures indicate that investors expect the Federal Reserve to hold rates steady at its October policy meeting, followed by a 25-basis-point increase in the federal funds target range at its December meeting.

The quarterly earnings reporting pace accelerates this week with 25 companies in the S&P 500 Index scheduled to report third-quarter results. Third-quarter earnings are expected to grow 29.6% year-over-year, with revenue growth of 12.4%. Full-year 2026 earnings are expected to grow 32.7%, with revenue growth of 12.5%.

In our ‘Dissecting headlines’ section, we look at the upcoming CPI and PPI reports.

Dissecting headlines: Inflation watch

Inflation returns to the spotlight this week with the release of the September Consumer Price Index (CPI) and Producer Price Index (PPI).

CPI measures prices paid by consumers, or retail inflation, and PPI measures prices received by domestic producers, or wholesale inflation.

Energy has driven much of the volatility in consumer inflation this year. Following the initial military action in the Strait of Hormuz at the end of February, energy prices surged 10.9% in March. Prices fluctuated as hostilities eased and intensified in subsequent months.

Through August, CPI showed energy prices 16.3% higher year-over-year, compared with a 3.4% increase in overall consumer prices. Core CPI, which excludes the impact of food and energy prices, increased a more modest 2.4%.

Shelter remained a source of pressure on core inflation, with prices up 3% year-over-year.

Higher fuel prices have also affected producer inflation. The PPI increased 5.4% year-over-year in August, while PPI excluding food, energy, and trade services rose 4.7%.

Diesel fuel prices were 24.1% higher during August alone. This contributed to higher transportation costs. These costs can impact business profitability and can potentially be passed along to consumers for goods and services.

One concern of inflation hawks is whether the elevated energy prices spread further into core inflation. Alternatively, an easing of hostilities in the Middle East and restoration of the energy supply chain could lower energy prices and help slow overall inflation.

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