Weekly Market Update October 12, 2026

The nation added an estimated 29,000 jobs in September. That figure fell well short of the consensus forecast of 84,000 and was accompanied by a 60,000 reduction to the prior two months’ tallies. Likewise, the unemployment rate ticked up from 4.1% to 4.2%. However, there were some encouraging signs, including the increase in the labor force participation rate, to 61.8%, and a gain in manufacturing and construction jobs. 

Inflation is still high, but the rate of increase has eased a bit. The September employment report showed some disinflation, with average hourly earnings increasing by just 0.1%. On a 12-month basis, the average hourly wage climbed 3.0%, its lowest reading since May of 2021. That, along with the more-modest August Personal Consumption Expenditures (PCE) Price Index data and the smaller-than-expected job creation last month, significantly reduced the odds that the Federal Reserve will raise the benchmark short-term interest rate at this month’s Federal Open Market Committee (FOMC) meeting. The Fed rate decision also comes shortly before the mid-term elections, which may give the central bank pause. 

Meanwhile, Treasury security yields have risen notably, with the rate on the 10-year note recently hitting its highest level in more than two decades. This has been driven by several factors, including higher oil prices that have reignited inflation concerns, growing fiscal deficits, and the issuance of corporate debt to fund the massive spending on artificial intelligence (AI). On a positive note, the fairly low demand for bonds, which is driving up yields, also is due, in part, to stronger-than-expected economic activity that creates optimism for stocks. On point, the U.S. gross domestic product (GDP) expanded at a solid estimated annualized rate of 2.2% in the second quarter. 

Conclusion: The stock market is searching for its next catalyst, which may come from the just-commenced third-quarter earnings season. And while it may seem to go against conventional wisdom that the stock market is holding near-record levels in a higher interest-rate environment, it should be noted that since 1950 the S&P 500 Index has finished the year with a positive return in 12 of the 14 years that the yield on the 10-year Treasury note has risen by a full percentage point or more.

Source: Valueline.com