Weekly Market Update August 10, 2026

Inflation is still elevated. The Personal Consumption Expenditures (PCE) Price Index, the assessment of inflation most closely watched by the Federal Reserve, did ease some in June, with the headline figure decreasing 0.1% on a month-to-month basis, reflecting the drop in oil prices during the 30-day period. However, on a 12-month basis, the PCE and core PCE, which excludes food and energy, increased 3.7% and 3.3%, respectively, with both metrics still running well above the Fed’s comfort level of 2.0%. 

The Federal Reserve continues to take a wait-and-see approach with regards to interest-rate policy. The central bank held the benchmark short-term interest rate steady, at 3.50% to 3.75%, during its July Federal Open Market Committee (FOMC) meeting. However, three regional Fed Presidents dissented in favor of a quarter-point rate hike. It was the most opposition in nearly a decade. Chairman Warsh described the disagreement as a “good family fight,” but the differing opinions do raise the odds of a hike at the September meeting. The bond market certainly thinks an increase is likely, as Treasury market yields continue to rise. 

The on-again, off-again fighting in the Middle East may complicate the Fed’s task. This is creating volatility in the global oil market, with the price of crude both here and overseas climbing in July, then falling back in the first week of August. Given the far-reaching impact of oil, increases may lead to a reacceleration in the pace of price growth at both the producer and consumer levels. So far, businesses and consumers have proven resilient amid higher energy prices, with personal consumption rising sharply during the second quarter. In a long view, the significance of fuel costs in the world economy as a whole is less than it was a generation ago. 

Corporate America is delivering outstanding results. With nearly two-thirds of the S&P 500 companies having reported as of press time, profit growth was averaging more than 45%. If this rate holds, it will mark the biggest increase since 2021 when the world was recovering from the COVID-19 pandemic. The profit gains are providing support for equities at a time when potential market headwinds (i.e., war, Fed uncertainty, and AI funding concerns) persist. 

Source: Valueline.com