Written by Amaury de Barros Conti, Partner | Vice President Investments
WHAT MOVED MARKET LAST WEEK
Markets faced a more challenging backdrop as firmer inflation data, higher oil prices, and another rise in Treasury yields increased expectations that the Federal Reserve could continue tightening policy at its September meeting. While the underlying economy continues to show resilience through stable employment and healthy corporate earnings, investors have become increasingly focused on the impact of higher interest rates on valuations, borrowing costs, and future growth prospects. The result was a broad-based pullback across equities, particularly among smaller and more rate-sensitive companies.
The S&P 500 fell 0.8% for the week, while the Dow Jones Industrial Average declined 1.6%. Small- and mid-cap stocks experienced the largest losses, with the Russell 2000 falling 2.4% and the S&P MidCap 400 down 1.9%. The Nasdaq Composite proved relatively more resilient, losing 0.7%, as per Bloomberg data.
- The week’s most important development was the August inflation data. Headline CPI rose 0.4% in August and remained at 3.4% year-over-year, while Core CPI increased 0.3% month-over-month, its fastest pace since April. Producer prices also surprised to the upside, with PPI rising 0.4% during the month and 5.4% year-over-year. Much of the pressure stemmed from higher energy costs, though the persistence of core inflation suggests price pressures remain broader than policymakers would prefer.
- The inflation reports materially altered market expectations. Futures markets increased the probability of a September rate hike from roughly 59% a week earlier to approximately 87% by Friday. While one additional rate increase may not materially alter the economic outlook, it reinforces the “higher-for-longer” environment that has characterized much of this cycle.
- Treasury yields moved sharply higher following the inflation data. The 10-year Treasury yield rose nearly 20 basis points to approximately 4.97%, testing the upper end of its recent trading range. The 30-year Treasury yield climbed above 5.3%, reaching its highest level in nearly two decades.
- Even in a difficult week for equities, several AI-related companies continued to report strong underlying demand. Oracle reported results and guidance that exceeded expectations, citing accelerating AI-driven demand across its cloud and infrastructure businesses. The report reinforced a theme that has emerged throughout earnings season: while investors may debate valuations, demand for AI infrastructure remains robust.
- At the same time, the sector faces new scrutiny. Public opposition to large-scale AI data-center construction continues to grow, and several industry leaders have recently cautioned about the pace of AI development. These debates may create periodic volatility but are unlikely to alter the long-term investment case, particularly as demand for AI infrastructure continues to outpace available supply.
LOOKING AHEAD
- The week may prove pivotal for markets. The Federal Reserve’s September meeting will dominate investor attention, with futures markets currently implying a high likelihood of a 25-basis-point rate increase. Beyond the rate decision itself, investors will focus on Chair Kevin Warsh’s comments regarding the future path of policy and whether additional tightening remains under consideration.
- Additional key releases include retail sales, industrial production, housing data, and policy decisions from both the Bank of England and the Bank of Japan. Meanwhile, geopolitical developments and energy markets remain important swing factors for inflation expectations and bond yields.
Amaury de Barros Conti
Partner | Vice President Investments
Source: Bloomberg Finance L.P. (index and ETF returns, rates, and commodities figures); T. Rowe Price; RBC Global Asset Management; Goldman Sachs Research; Bloomberg Economics; Seeking Alpha; CNBC; Bureau of Labor Statistics; and U.S. Treasury. Data as of September 11, 2026. Commodities & Crypto returns are represented by the ETFs above and are used as proxies where the exposure is not directly investable. ETF returns reflect total returns, including reinvested distributions and are net of each fund’s operating expenses. Index returns shown elsewhere on this page are presented gross of fees, so the two are not directly comparable. References to specific ETFs are for informational purposes only and are not recommendations to buy, sell, or hold any security.
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