Wall Street closed out the week on a firmer note, with major indexes finishing higher Friday as Treasury yields stabilized and oil prices eased, giving investors a bit of relief after a stretch of market turbulence.
The backdrop for markets has been the Federal Reserve's decision earlier this month to raise its benchmark interest rate by a quarter point, to a range of 3.75% to 4%, the central bank's first increase since 2023. The move, approved unanimously by the Federal Open Market Committee, came as officials pointed to inflation that has stayed elevated, driven in part by tariffs and by the energy price effects of tensions in the Middle East. Fed officials also raised their inflation projections for this year and signaled they do not expect to reach their 2% inflation target until 2029, even as they penciled in only modest further rate moves in the years ahead.
Despite the higher-rate backdrop, the S&P 500 has remained close to its all-time highs through September, a resilience that some strategists attribute to strong underlying economic growth rather than runaway inflation. That distinction matters for how investors position themselves: this week, cyclical parts of the market, including the Dow Jones Industrial Average, financials, and small-cap stocks, lagged, while the Nasdaq Composite and the group of dominant technology companies known as the Magnificent Seven advanced. Data released Friday showed durable goods orders were unchanged in August, but core capital goods orders, a proxy for business investment, rose a healthy 1.6% for the month.
Looking ahead, investors face a busy week of data before the Fed's October meeting. Job openings figures arrive first, followed by the Fed's preferred inflation gauge, the personal consumption expenditures price index, alongside the final estimate of second-quarter economic growth. The week closes with the September jobs report, which economists expect to show hiring slowing sharply, with payroll growth roughly halving to around 85,000 jobs from August's 162,000, while the unemployment rate is expected to hold steady at 4.1%.
The September jobs report and the PCE inflation reading, both due in the coming week, are likely to shape expectations for whether the Fed moves again at its October meeting.
Why did the Fed raise rates instead of cutting them?
Officials pointed to inflation that has stayed above their target, driven in part by tariffs and energy price pressures, even as growth has remained solid.
What is expected in next week's jobs report?
Economists expect the September jobs report to show payroll growth slowing to roughly 85,000 jobs, down from 162,000 in August, with unemployment holding at 4.1%.