Asset Management
10/05/2026 Market Strategy
October 05, 2026
Key Takeaways
US Markets continued to show resilience last week in the face of a flurry of data and two speeches by Federal Reserve officials that once again changed the narrative in both the equity and bond markets.
This week brings fewer economic data points to ponder but includes the ISM survey of services firms this morning and the University of Michigan’s consumer sentiment readings for October on Friday.
The economic data released last week along with the activity in the stock and bond markets overall looked to point towards the resilience of fundamentals.
Next week brings the start of the Q3 earnings season for the S&P 500 companies when the big banks begin reporting results on Oct. 13. FactSet’s bottom-up estimates show expected earnings growth of 29.5% for the S&P 500 in the September quarter. If realized, it would mark the third straight quarter in which growth exceeded 25% from a year earlier.
Friday’s jobs report felt like “déjà vu all over again” from a month ago, only with economic softness the prevailing theme this time around as the jobs gain of 29,000 was less than a third of the median forecast. Recall that in early September, the August jobs report surprised to the upside with a gain of 162,000 (and resetting the narrative then toward tighter monetary policy). That figure was revised lower to 133,000 and gains for August were also trimmed by 31,000.
The September jobs report also showed softer wage growth as the average hourly earnings measure added just 0.1% in the month (0.3% expected).
The unemployment rate ticked up a tenth, but this was due to a rise in labor force participation as more people looked for jobs, a result that we view as bullish for the economy. Overall, we’re hesitant to make too much of one month’s data, particularly given the magnitude of revisions in recent months.
The ISM manufacturers survey, released on Thursday, was relatively steady from the prior month and remained well over the threshold for expanding conditions.
Revisions to the GDP accounts show that the economy was stronger in the June quarter than previously thought: Q2 growth was revised up to 2.2% from 1.5% previously estimated. Data on personal spending for August rose 0.9 from the prior month while personal income rose 0.2%.
Yields at the front end of the Treasury yield curve slid lower over the week as speeches from two Federal Reserve officials suggested that the central bank might take a “wait and see” approach to incoming data before making another policy move.
The soft employment report, a relatively tame reading on the core PCE deflator (the Fed’s preferred inflation measure) and lagging consumer confidence are likely to reinforce that view. Data from that inflation index, which excludes food and energy items, rose just 0.2% in August, a tenth less than expected. In addition, the Conference Board’s consumer confidence index fell to a ten-year low in September as consumers soured on both the near-term and longer-term outlook and as inflation expectations rose.
The policy-sensitive two-year Treasury note yield fell 10bp from Monday to Friday to end the week at 4.83% on reduced expectations for a Fed hike at the Oct. 28th meeting. (For comparison, the 10-year yield rose 3 bp from Monday to Friday to end the week at 5.24%).
As the fourth quarter gets further underway, we consider the total return performance of the S&P 500 and its eleven sectors in the quarter just ended last Wednesday.
On a total return basis, the broad market returned 2.5% as just four of its eleven sectors delivered positive price returns for the period.
Energy, information technology, health care, and communications services posted respective positive total returns of 17.9%, 9.2%, 5.9%, and 1% in the period.
The other seven sectors of the S&P 500 delivered negative total return performances for the quarter with consumer staples, financials, materials, real estate, consumer discretionary, industrials and utilities sectors off 1.6%, 2.2%, 3.2%, 5.9%, 8.7%, and 11.2% respectively in the period.
A mixed bag of factors that included higher interest rates, inflation concerns, and geopolitical risks generated market volatility, portfolio rotation and rebalancing activity dogged the majority of the benchmark’s sectors in the third quarter.
With price performance of stocks often regarded as a discount mechanism for what lies ahead, we should expect that when Q3 earnings season gets underway on October 13 traders and investors will be paying particularly close attention to results and any guidance provided by corporate managers.
Last week stocks digested September’s non farm payroll gain (of just 29,000--well below surveys of economists’ expectations for 90,000 jobs) in relative stride as market participants appeared to take the disappointing number to signal that the Federal Reserve would be able to skip raising its benchmark rate at its next FOMC meeting on October 28.
For the week ended last Friday, the major indices delivered mixed performances with the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 (small caps) slipping 1.3%, 0.3%, and 0.2% respectively while the NASDAQ Composite, S&P 400 (mid-caps) and the S&P 600 (small caps) edged higher by 0.5%, 0.5%, and 0.2% respectively.
Bond prices came under pressure last week with the 30-year US Treasury bond touching 5.67% last Tuesday and the US 10-year Treasury note’s yield reaching its highest level since 2002 at 5.33% on Thursday Oct. 1 in large part on concerns about current levels of debt outstanding and ongoing levels of bond issuance by governments and corporations.
That said, in our view the economic data released last week along with the activity in the stock and bond markets overall looked to point towards the resilience of fundamental factors that still remain capable of offsetting near-term risks and concerns in an environment that suggests in our view a process of price discovery taking place with prospects of moving towards a new normal in the not-too-distant future.
With the NASDAQ Composite closing last Friday just 0.20% from its record high reached on September 22--and the S&P 500 closing last Friday just 1% from its record high reached on August 13--a solid batch of better than expected economic data and robust Q3 earnings results in the days and weeks ahead could see markets move into a rally mode in this last quarter of the year.
Chief Investment Strategist, Oppenheimer Asset Management Inc.
John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.
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