Weekly Market Update September 28, 2026

The Federal Reserve’s primary focus right now is inflation. This was evidenced by the Federal Open Market Committee’s (FOMC) decision to raise the benchmark short-term interest rate by a quarter-point, to 3.75%-4.00%, at its September meeting. We also learned that 16 of the 18 FOMC members anticipate at least one more rate hike this year. With the pace of both consumer and producer (wholesale) price growth still running above the Fed’s target rate of 2.0%, our sense is that the central bank will increase the Fed interest rate by another quarter-point before year’s end, likely targeting the December FOMC meeting. 

The financial markets had a rather orderly reaction to the interest-rate hike. Ironically, long-term Treasury security yields eased a bit, as the Fed did what investors hoped it would do. In general, Wall Street liked that Fed Chairman Kevin Warsh endorsed the decision to raise rates despite calls by President Trump, who appointed him, to cut rates. There have been growing worries in recent years over the Fed maintaining its independence, and this decision provided some comfort for market watchers that the central bank will not be swayed by outside influences. 

The current economic environment gives the Fed leeway to concentrate on inflation. The September FOMC statement said that the U.S. economy continues to grow at a solid rate, while job additions are keeping pace with the workforce and unemployment remains low. This gives the Fed comfort that a few rate hikes would not put unwarranted pressure on the economy and/or labor market. Domestic spending remains resilient and private-sector investment, powered by astronomical spending on artificial intelligence (AI), is robust. On point, the Commerce Department reported that U.S. retail sales rose 1.2% in August, far exceeding the consensus forecast. On the negative side, the housing market remains weak, with high mortgage rates reducing demand for homes across much of the nation. 

Conclusion: Stocks continue to climb the “wall of worry,” which includes interest-rate increases and continued geopolitical unrest in the Middle East and Ukraine. But with corporate profit growth expected to average more than 25% in the third quarter, those earnings should provide further support for stocks as the final stretch of 2026 commences.

Source: Valueline.com