The Dow Jones Industrial Average (Dow) fell 1.7 percent, the Standard & Poor’s 500 Index (S&P 500) lost 0.1 percent, and the Nasdaq Composite Index (Nasdaq) gained 0.7 percent for the week ending Sept. 18. Sector breadth was negative with eight of the 11 S&P sector groups closing lower. The utilities sector (-3.0 percent) was the weakest performer while the healthcare sector (1.8 percent) was the strongest.

*See below for Index Definitions

Market Observations: 9.14.2026–9.18.2026

The S&P 500 finished lower for a second straight week as investors digested a rate hike by the Federal Reserve (Fed), higher energy prices, and a jump in interest rates that at one point pushed the yield on the 10-year Treasury to the highest level in nineteen years. While the rate hike was widely expected, the hawkish tone from Fed Chair Warsh and indications of another increase before year-end seemed to catch some investors off guard. Helping to limit the losses in the broader market was much better than expected August retail sales data and little sign that the artificial intelligence (AI) infrastructure investment cycle is slowing, despite dire warnings over the potential threat from AI.

FOMC Meeting: As widely expected, the Fed raised interest rates by a quarter percentage point last week and penciled in an additional hike later this year, in an effort to contain inflation. During the post-meeting press conference, Fed Chair Warsh said, “we removed a dose of accommodation so that financial and credit conditions would be more consistent with our ultimate objectives.” The rate hike was the U.S. central bank’s first increase since July 2023. In his remarks to reporters, Warsh restated his concerns over inflation, saying too many categories of products and services were showing annualized price gains above 3 percent on a 6- and 12-month basis. “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved,” he said. The Federal Open Market Committee’s (FOMC) vote was unanimous, with all agreeing to increase the benchmark federal funds rate to a range of 3.75 percent to 4.00 percent. According to the Summary of Economic Projections, the dot plot showed sixteen officials projecting at least one additional increase this year. The median projection for 2027 pointed to no additional rate hikes next year.

Seasonality—Buy the Dip: The month of September historically has proven to be the weakest month of the year, with the S&P 500 Index performance falling by 1.15 percent on average over the past 25 years. However, the pullback in September typically sets the stage for strong results during the fourth quarter. During the same 25-year period, the S&P 500 has posted an average fourth quarter gain of 4.62 percent, with positive results in 21 years (84 percent).

Economic Roundup: U.S. retail sales in August rose by the most in five months in a broad advance, indicating consumers continued to spend despite rising fuel prices. The value of retail purchases increased 1.2 percent after a revised 0.5 percent decline in July, and a median estimate of economists calling for a 0.8 percent advance. Control-group sales, which feed into the government’s calculation of goods spending for Gross Domestic Product, increased 1.4 percent, the most in nearly two years. Meanwhile, applications for U.S. unemployment benefits fell to the lowest since July and recurring claims dropped to a more than two-year low, adding to signals of labor market stability. Initial claims fell 10,000 to 196,000 in the week ended September 12, one of the lowest readings since 1969, according to Labor Department data. Continuing claims, a proxy for the number of people receiving benefits, fell to 1.73 million in the week ended September 5, the lowest since 2024. Elsewhere, manufacturing momentum in the Philadelphia Fed region moderated in September after the summer’s surge, though new orders and shipments remained elevated. The index of future activity declined sharply but remained positive, with only 5 percent of firms expecting activity to decline in the next six months. The prices-paid index reversed declines, rising eight points to 48.6, with more than half of firms reporting higher input prices.

The Week Ahead: All eyes are expected to be on the meeting between President Trump and China’s President Xi on Thursday. The week will be relatively light on the data front with the focus on Wednesday’s release of the S&P manufacturing and services PMIs on Wednesday. Other notable releases include new home sales on Thursday and durable goods orders on Friday. On the earnings front, just six members of the S&P 500 are scheduled to release quarterly results, including retailer Costco on Thursday after the close of trading. It will be a busy week of Fed speak with eleven presentations scheduled throughout the week.

— By Michael Schwager, Chief Market Strategist, Managing Director

The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since Oct. 1, 1928.

Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Nasdaq Composite Index is a broad-based capitalization-weighted index of stocks in all three Nasdaq tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of Feb. 5, 1971.

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