Weekly Market Update October 19, 2026

Inflation is still running well above the Federal Reserve’s target level of 2.0%. This was again evident in the latest reading on consumer prices. Specifically, the Consumer Price Index (CPI) and the core CPI, which excludes the more-volatile food and energy components, increased 0.6% and 0.3%, respectively, in September, with the all-inclusive figure rising more than it did in August. On a 12-month basis, the CPI and core CPI rose 3.7% and 2.6%, respectively. 

The volatile energy market is exacerbating inflation concerns. The price of diesel, which is used to produce and transport goods, recently hit an all-time high as the ongoing wars in the Middle East and Ukraine continue to disrupt the global oil supply. Higher crude prices make it more expensive for businesses and consumers to function, especially as the peak heating season approaches. The consumer sector has proven resilient this year, helped by larger tax refunds, but this may not continue if energy prices remain elevated and eat into household spending budgets. 

Nevertheless, the central bank may hold the benchmark short-term interest rate steady at this month’s Federal Open Market Committee (FOMC) meeting. Despite inflation concerns, we think weaker-than expected job creation last month gives the Federal Reserve a reason not to raise rates right ahead of the midterm elections. Too, the bond market is doing work for the Fed, with the recent jump in Treasury security yields restricting the degree of borrowing outside of the massive debt incurred to finance AI spending. Third-quarter earnings season is off and running. The expectation is that profit growth for the S&P 500 companies will average about 30%, fueled, in large part, by AI spending. A good showing, especially by the technology sector, will be needed to support valuations. 

Conclusion: Stocks pulled back some from the record highs hit in early October, as hotter-than-expected inflation data, rising Treasury yields, and profit-taking in the technology sector weighed on Wall Street.

Source: Valueline.com