Weekly Market Update August 24, 2026

The Federal Reserve is now expected to hold the benchmark short-term interest rate in the range of 3.50% to 3.75% at its September Federal Open Market Committee (FOMC) meeting. The July economic data, which included a decline in monthly job creation and an easing in the pace of price growth, significantly decreased the odds of a rate hike at the next meeting. Investors should note that the Fed was scheduled to hold its annual economic symposium in Jackson Hole, Wyoming shortly after we went to press. 

Inflation, rather than the jobs situation, remains the bigger concern for the Fed. However, the July inflation data, along with the decline in wage growth last month, does allow the central bank to take a wait-and-see approach regarding the Fed interest rate. On the heels of a more-benign July Consumer Price Index (CPI) reading, the companion Labor Department report showed an easing in the pace of price growth at the wholesale level. Specifically, the Producer Price Index (PPI) was unchanged on a month-to month basis, while the core PPI, which excludes food and energy, increased 0.2%. Both figures came in below forecast. The 12-month PPI increase of 4.7% was down from the 5.5% advance recorded in June. In the meantime, the fixed-income market is potentially cooling economic activity, with the 30-year Treasury bond yield recently topping 5.30%, its highest level since 2007. 

The central bank also may be worried that an interest-rate hike to slow inflation would hurt an economy that has recently shown signs of softness. The gross domestic product (GDP) increased by an estimated annualized rate of 1.5% in the second quarter, which was below forecast. There are some definite weak spots that have been offset by the impact of astronomical spending on artificial intelligence (AI) infrastructure. The housing market is still suffering from higher mortgage rates, while the positive impact from larger tax refunds is expected to dissipate during the second half of the year. On point, retail sales fell by an unexpected 0.2% on a month-to-month basis in July, the worst showing since early 2025. 

Conclusion: The backdrop, including strong corporate earnings growth and the decreased likelihood of a near-term interest-rate hike, remains favorable for stocks.

Source: Valueline.com