September Market Recap
Encouraging inflation data at the end of the month provided some solace, but financial markets spent most of September coping with the reality of sharply higher interest rates.
Benchmark returns show an unusually wide gap in monthly performance. The Dow Jones Industrial Average lost more than 4% in September. The S&P 500 was only slightly negative. While the technology-dominated NASDAQ rose nearly 2%, highlighting gains driven increasingly by a relatively small number of A.I. related stocks.
A look at sector-specific performance reveals a similar theme. Technology (+4.4%) and Communications Services (+4.3%) were up big in September. Every other sector in the S&P 500 was negative, with nearly half losing 6% or more. Financials (-7.3%), Materials (-6.9%) and Real Estate (6.7%) were the worst of the bunch.
Benchmark Returns: September 2026 | YTD 2026
|
Dow Jones
|
S&P 500
|
NASDAQ
|
-4.29% | +5.91%
|
-0.45% | +11.77%
|
+1.86% | +15.57%
|
|---|
Bond yields have been rising steadily since the Iran war began seven months ago, but the trend accelerated in September. Ten-year US Treasury yields rose above 5.3% on September 30 (up from 4.76% a month earlier), equaling their highest mark in nearly 25 years (April 2002).
The bond market is telling us a few things: First, that inflation is (again) a legitimate concern. Second, that the Federal Reserve needs to counteract inflationary pressures with appropriate policy changes.
The Federal Reserve did increase interest rates by 0.25% following its September 15-16 meetings, its first hike in more than three years (July 2023). New Fed Chair Kevin Warsh seems committed to price stability and futures contracts suggest a greater than 50% likelihood of another 0.25% hike in late October.
Higher bond yields create more competition for stocks since investors can achieve more attractive returns from conservative assets. While the major equity benchmarks still trade relatively close to their 52-week highs, that is masking some underlying weakness.
According to Morningstar, 46% of stocks in the S&P 500 are negative year-to-date. 27% of stocks in the S&P 500 (135 companies) were down more than 10% in September alone.
While inflation fears are still simmering, the latest data was somewhat encouraging. The Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge, showed 3.4% inflation over the last year. That’s up 0.3% from a month earlier but better than the 3.7% expected.
Economic growth remains impressive, which helps justify more restrictive monetary policy. The final revision of second-quarter GDP data showed 2.2% annualized growth (up from 1.5% originally).
The ongoing war in Iran means persistently higher energy prices. West Texas Intermediate Crude oil ended September near $93 per barrel, up 3% from a month ago but down from $106 per barrel mid-month. The national average price of unleaded gasoline ended September at $4.41 per gallon, up 8% in the last 30 days. Diesel fuel, sometimes referred to as “the workhorse of the global economy,” rose to $6.39 per gallon, up 13% from a month ago.
International stocks trended lower last month. Non-US Developed equities fell 3.3%. Emerging Markets held up better (-0.3%).
With interest rates markedly higher, the cost of financing a home has become even more expensive. The national average for a 30-year fixed mortgage has risen to 7.3%, the highest level since November 2023.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
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