Updated 10/19/2026

Our Perspective on the Markets Last Week

Equity markets finished a volatile week with sharply different results across the major indexes, as heavy selling in technology contrasted with strength elsewhere. The price change of select U.S. indexes for the week was: S&P 500 (-1.95%), Dow Jones Industrial Average (+0.67%), and Nasdaq (-4.48%). The yield on the 10-year Treasury note declined 0.15 percentage points to 5.09%.

Monday and Tuesday: Markets started the week mixed as rising oil prices and concerns about AI infrastructure spending weighed on technology shares. Third-quarter earnings season began with mixed results from major banks. Despite some disappointing initial reactions, the reports generally reflected resilient consumer activity and loan demand, while financial stocks held up considerably better than technology shares. Meanwhile, reports of technological advances by a Chinese memory-chip manufacturer added selling pressure to semiconductor shares.

Wednesday: A hotter-than-expected September Consumer Price Index (CPI) report triggered a sharp selloff and increased expectations for another Federal Reserve interest-rate hike. Consumer prices rose 0.6% for the month and 3.7% from a year earlier, while core inflation increased 0.3%, exceeding expectations. The report pushed Treasury yields higher, intensifying concerns about the substantial debt being used to finance AI infrastructure. CoreWeave emerged at the center of the bull-bear tug-of-war as bond prices for both CoreWeave and Oracle declined, pushing their debt yields higher and raising questions about future financing costs. CoreWeave shares fell approximately 15%, Oracle declined nearly 9%, and the Nasdaq lost 1.88%.

Thursday: Selling continued early after producer prices rose 1.3% in September, well above expectations. However, declining Treasury yields helped bring buyers back into the market. The Nasdaq recovered from an early decline of approximately 1.4% to finish slightly higher, while CoreWeave reversed a nearly 10% decline to close approximately 6% higher, illustrating the dramatic shifts in sentiment surrounding the AI trade.

Friday: The recovery proved short-lived as selling resumed across AI-related companies and semiconductors. CoreWeave fell approximately 12%, bringing its weekly decline to nearly 25%, while the Nasdaq lost another 2.1% during the session.

The selling pressure within technology was particularly severe. Semiconductors declined 10.53% for the week, software fell 7.39%, and memory-chip stocks plunged 18.78%. The S&P 500 Momentum ETF also lost 6.79%. Meanwhile, consumer staples gained 5.02%, energy advanced 4.86%, and healthcare rose 3.45%. The selloff extends the Russell 1000 Value Index's outperformance compared to the Russell 1000 Growth Index by nearly 24 percentage points over the past year, a historically unusual difference.

The dramatic swings also illustrated how quickly investor sentiment can change. While concerns over AI spending, borrowing costs, and future profitability deserve attention, short-term selling can be amplified as investors react to headlines and follow the crowd.

Looking Ahead:

Following last week's sharp rotation, markets will be watching whether strength in value-oriented and defensive sectors broadens into other areas, or whether the selling pressure in technology and AI-related investments begins to subside. Third-quarter earnings from Meta, Tesla, Netflix, IBM, Lam Research, and others could help determine whether concerns over AI spending and future profitability are justified or have become excessive.

Developments involving Russia and Ukraine will also draw attention following the administration's decision to ease certain sanctions on Russian energy exports and reports of possible new peace negotiations. Combined with the ongoing conflict in the Middle East, these developments could have a meaningful impact on oil prices, inflation expectations, and Treasury yields.

The economic calendar includes housing starts, building permits, manufacturing and services activity reports, and consumer sentiment. With the Federal Reserve's October 27–28 meeting approaching, markets will also be watching for changes in expectations surrounding further interest-rate increases.

Stay Informed. Receive weekly updates of our outlook on the markets in your inbox.

Probability of an interest rate change at next FOMC meeting:

DECREASE -25 bps
%
No Change
%
INCREASE +25 bps
%

Current Target Rate is 3.50% - 3.75%

Select Economic Data Releases

*Colored icon denotes a new data release.
Gross Domestic Product

The final estimate revised second-quarter U.S. GDP growth up to a 2.2% annualized rate from 1.5%, reflecting stronger investment, consumer spending, and government spending than previously reported.  First-quarter GDP was revised higher to an annualized 2.1%, although the increase was driven primarily by lower imports while consumer spending was revised down sharply, pointing to softer underlying economic momentum..  The final revision to fourth quarter GDP showed growth of just 0.5%, reflecting a notable slowdown in economic momentum.  For the full year 2025, GDP grew by 2.1%.  U.S. GDP grew at a strong 4.4% annualized rate in the third quarter of 2025, marking the fastest pace of growth in about two years, led by solid consumer spending, exports, investment, and government outlays.  The final estimate of Q2 GDP came in at an annualized rate of 3.8%, well above the initial 3.0% estimate.  The final revision showed gross domestic product shrank at a revised -0.5% annual rate in the first quarter.  More than the previous revision of -0.2%.  The final revision of Q4 2024 GDP was raised a tenth of a percent to a 2.4% annualized pace.  Q3 GDP showed the U.S. economy expanded at a frothy 3.1% annual pace in the third quarter, revised up from 2.8%.  Q2 GDP grew at a 3.0% annual pace.  Q1 2024GDP grew at a 1.4% pace due largely to much slower growth in consumer spending.  The final revision of Q4 GDP rose to 3.4%.  U.S. GDP grew at 4.9% annual pace in the third quarter.  

Employment Data

The U.S. economy added 29K jobs in September, below the 90K expected, while the unemployment rate edged up to 4.2%. July and August payrolls were revised lower by a combined 60K jobs, reinforcing signs of slower hiring and strengthening the case for a pause in Fed rate increases. Following revisions, August recorded a gain of 133K and July a loss of 10K jobs, while June’s gain remained unchanged at 31K. May was revised down to 129K jobs gained. The April employment report came in stronger than expected, with nonfarm payrolls increasing by 115K and the unemployment rate holding steady at 4.3%.  In addition, March payrolls were revised higher, reinforcing the view that the labor market remains resilient despite signs of broader economic moderation.  The March nonfarm job gains were revised up to 185K from 178K.  The unemployment rate held near 4.3%, suggesting the labor market remains stable overall.  The U.S. labor market showed modest weakness in February, with nonfarm payrolls declining by 92K jobs, while the unemployment rate edged up to 4.4%. Despite the softer headline, average hourly earnings rose 0.4% for the month and 3.8% from a year earlier, indicating wage growth remains relatively firm.  The U.S. added 130K jobs in January, while the unemployment rate held steady at 4.3%, indicating continued but moderate labor market growth.  The economy added approximately 50K jobs in December, noticeably less than the anticipated addition of 60K, but the unemployment rate unexpectedly decreased to 4.4%, suggesting that while hiring has slowed, labor conditions remain relatively stable.  The November U.S. nonfarm payrolls report showed a modest rebound in hiring with about 64K jobs added, beating expectations after an unusually large October decline of -105K, primarily driven by steep federal government job losses tied to the prolonged government shutdown.  The unemployment rate ticked up to around 4.6%, its highest in several years, signaling continued cooling in the labor market. The September nonfarm payrolls increased by 119K, while the unemployment rate rose to 4.4%, signaling modest job gains amid a cooling labor market.  Employers added a mere 22K jobs in August.  July nonfarm payrolls rose just 73K while June and May were revised significantly lower.  

Retail Data

September retail sales rose 0.8%, exceeding expectations of 0.3%, following an upwardly revised 1.3% increase in August. However, much of the gain reflected a 6.4% surge in gasoline station sales, as retail sales excluding gasoline increased just 0.2%, suggesting softer underlying consumer spending. Retail sales in July fell by 0.5%. June retail sales rose a modest 0.2% from May and 6.7% from a year earlier, while sales excluding automobiles and gasoline increased 0.4%, pointing to continued but uneven consumer spending.  Retail sales rose a stronger-than-expected 0.9% in May, while sales excluding automobiles increased 0.7%, indicating that consumer spending remains resilient despite persistent inflation concerns.   Retail receipts rose by a seasonally adjusted 0.5% in April, but mostly due to increased spending on gas.  Retail sales surged 1.7% in March 2026, exceeding forecasts, driven heavily by a 15.5% spike in gasoline prices due to the Iran conflict.  Retail sales rose modestly in February, increasing approximately 0.6% and coming in generally in line with expectations after falling -0.2% in January.  U.S. retail sales were flat in December (0.0% month-over-month), missing expectations and signaling softer consumer demand as households pulled back on big-ticket purchases. Year-over-year sales were up about 2.4%.  November retail sales rose about 0.6 % month-over-month, rebounding from a revised dip in October and topping forecasts.  Retail sales in the US flattened in October from September 2025, following a downwardly revised 0.1% rise in the previous period.  

Housing Data

More housing data is coming this week. September existing-home sales rose 1.5% to an annualized rate of 3.99 million, exceeding expectations, but remained 2.2% below year-ago levels. Housing inventory increased to 1.60 million homes, the highest since November 2019.  New-home sales rose 6.4% in August to a seasonally adjusted annual pace of 684,000, though sales remained 2.0% below a year earlier.  Pending home sales edged up 0.3% in August but remained 4.7% below year-earlier levels, indicating that housing demand remained subdued amid elevated mortgage rates. New-home sales fell 10.5% in July to an annualized rate of 607,000, their lowest level since January, as elevated mortgage rates weighed on demand. The supply of unsold homes increased to 9.6 months, while the median new-home price declined 2.3% from June and the broader FHFA House Price Index rose a modest 2.1% from a year earlier.  Housing starts in June jumped 19.0% largely because of increased multifamily construction, while building permits fell 3.0%.  New home sales unexpectedly declined 7.3% in May to an annualized rate of 580,000, while the supply of homes for sale increased to 496,000.  Existing home sales rose 3.2% in May to an annualized pace of 4.17M units, the fastest pace since December, while the median home price increased 1.3% from a year earlier to a record $429,300 for the month of May.  New home sales fell 6.9% in April to an annualized rate of 635K units, reflecting some cooling in housing demand as higher mortgage rates and affordability challenges continued to weigh on buyers.  Existing-home sales increased by 0.2% in April.  Despite higher mortgage rates, new home sales rose in March to a seasonally adjusted annual rate of 682K, increasing 7.4% from the prior month and slightly above year-ago levels.  New home sales rose 1.6% in February to an annualized pace of roughly ~662K units, while pending home sales declined about -0.8%.   Existing-home sales increased by 1.7% in February 2026. For the month, sales rose in the Midwest, South and West, but fell in the Northeast.  Year-over-year sales rose in the South and declined in the Northeast, Midwest and West.  December pending home sales report showed a notable pullback in the U.S. housing market, with the National Association of Realtors’ Pending Home Sales Index sliding 9.3% month-over-month to an index level of 71.8, the largest drop in contract activity since early 2020, and down about 3% from a year ago. New single-family home sales were essentially flat in October at about 737K units annualized, just a touch below September’s 738K but still roughly 19% higher than a year ago, suggesting steady builder demand even as closings level off.  Existing-home sales climbed about 5% to roughly 4.35M units, highlighting stronger resale market activity alongside cautious new construction. 

Leading Indicators

The update of the LEI comes this week. The Leading Economic Index edged down 0.1% in August, suggesting slower economic growth ahead as weak consumer expectations and softer housing activity weighed on the outlook. The Conference Board’s Leading Economic Index rose 0.2% in July, its fourth gain in six months, lifting its six-month growth rate into positive territory for the first time in more than four years.  The Conference Board's LEI declined 0.1% in June, signaling moderation in economic activity.  The Conference Board's Leading Economic Index (LEI) rose 0.2% in May.  The Conference Board’s Leading Economic Index rose slightly by 0.1% in April 2026 to 97.4 (2016=100), following a 0.6% decline in March. The LEI rose 0.3% in February.  The U.S. Leading Economic Index (LEI) fell by -0.2% in December, following the -0.3% decline in November.  The U.S. Leading Economic Index (LEI) fell by -0.5% in August.  The Conference Board Leading Economic Index (LEI) for the US was revised up to a 0.1% increase in July 2025 to 98.7 (2016=100), after declining by -0.3% in June.  The LEI fell by -2.7% over the six months between January and July 2025, a faster rate of decline than its –1.0% contraction over the previous six-month period (July 2024 to January 2025).  The Conference Board Leading Economic Index® (LEI) for the US ticked down by -0.1% in May 2025 to 99.0 (2016=100), after declining by -1.4% in April (revised downward from –1.0% originally reported).  The Leading Economic Index (LEI) for the U.S. declined by -0.7% in March to 100.5 (2016=100). The LEI in February fell by -0.2% after an upward revision in January from -0.3% to -0.2%.  The Leading Economic Indicators index rose 0.1% in December 2024 (upwardly revised from an initially estimated decline of 0.1%).  November LEI was revised up +0.4% in November. The LEI declined by -1.3% over the second half of 2024, slightly less than its -1.7% decline over the first half of 2024.  The leading index dropped -0.3% in October, largely because of higher jobless claims, fewer building permits and a decline in manufacturing orders.  

Inflation

September consumer prices (CPI) rose 0.6%, bringing annual inflation to 3.7%, up from 3.4% in August, while core CPI increased a stronger-than-expected 0.3%. Producer prices (PPI) surged 1.3%, more than double expectations, pushing annual wholesale inflation to 6.3%. Higher energy costs contributed significantly to both increases, raising concerns about persistent inflation and the potential for additional Federal Reserve interest-rate hikes. August’s PCE inflation report showed prices rose 0.3% for the month and 3.4% from a year earlier, while core prices, excluding food and energy, increased 0.2% and 3.0%, respectively; consumer spending rose 0.9%. Producer prices rose a stronger-than-expected 0.4% in August and 5.4% from one year earlier. Consumer prices also increased 0.4% for the month and 3.4% year over year, while annual core inflation eased to 2.4%; overall, the reports reinforced expectations for a quarter-point Federal Reserve rate increase.  The PCE Price Index rose 0.2% in July and 3.7% from a year earlier, while core PCE increased 0.2% for the month and 3.3% year over year. With both annual measures still well above the Federal Reserve’s 2% target, the report showed little progress toward lower inflation.  Consumer prices rose 0.1% in July and 3.4% from a year earlier, while core inflation increased 0.2% for the month and 2.5% year over year. Producer prices were unchanged at the headline level, largely validating the CPI report and easing concerns about an immediate interest-rate increase, although wholesale inflation remained 4.7% above its year-earlier level.  The PCE inflation index increased 3.7% from one year earlier in June, while core PCE inflation rose 3.3%.  Inflation data was encouraging in June, as consumer prices fell 0.4% and core prices were unchanged, while producer prices declined 0.3% and the underlying measure excluding food, energy, and trade services rose just 0.1%.  The Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) Price Index, rose 0.4% in May and 4.1% from a year earlier, while core PCE increased 0.3% for the month and 3.4% year-over-year, indicating inflation remains above the Fed's long-term target.  Consumer prices rose 0.5% in May and 4.2% from a year earlier, though core inflation remained relatively contained at 0.2% and 2.9%, respectively.  Meanwhile, producer prices increased 0.4% in May and 3.8% over the prior year, as higher energy costs continued to pressure businesses.  

Important Disclosures:  The material presented is general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Opinions and estimates offered constitute Investment Management Corporation’s judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. Some of the information provided has been obtained from third party sources believed to be reliable, but no warranty of accuracy is given. IMC has not taken into account the investment objectives, financial situation or particular needs of any individual investor. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular investor's financial situation or risk tolerance. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary. The material presented does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products.