The markets have paused and taken a breath over the past week. There’s no striking Macro news at the moment.
The entire yield curve has moved up and is in a rising trend. The 10 year TIPS and 10-year real yield both suddenly jumped in March 2026 so this isn’t about inflation since both are inflation-adjusted. Of course, the 10 year Treasury also adds in inflation risk. The trend is upward.
The 10 year Treasury yield impacts everything from the federal debt to mortgages to business borrowing cost. It may drop from this level as it has before…or it may continue up since the underlying trends of increased government and business (including AI-related) borrowing are not going away anytime soon.
The stock indexes have plateaued. Volatility in both the SPX and over individual stocks have dropped.
The Fear & Greed Index is in Fear. The trade is risk-on since SPX and junk bonds are rising faster than the price of the 10-year Treasury. (The price of the 10-year Treasury fell since its yield rose.)
USD is in the middle of its channel. Copper plateaued. Gold and silver may have bottomed but it’s too soon to tell.
Oil and natgas are rising. Gasoline plateaued but diesel (which impacts the economy via truck shipments) is rising.
The stock market bubble is still inflated.
Total nonfarm payroll employment increased by 162,000 in August, and the unemployment rate was unchanged at 4.1 percent. That was a strong employment report and low unemployment.
Economic activity in the manufacturing sector expanded in August for the eighth consecutive month, say the nation’s supply executives in the latest ISM® Manufacturing PMI® Report. The New Orders Index expanded for the eighth consecutive month after four straight readings in contraction.
Economic activity in the services sector continued to expand in August, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered 55.4 percent, the 26th consecutive month in expansion territory. The New Orders Index registered 60.9 percent, 3.7 percentage points above July’s figure of 57.2 percent. Services are 80% of the economy.
The Atlanta Fed’s Third-Quarter GDPNow Estimate for 2026:Q3 is 4.7%. That’s an amazingly fast growth rate and way above the blue chip consensus. Such a fast growth rate would be inflationary due to business capital needs.
Inflation is still well above the Fed’s target of 2%, a fact that Fed Chair Kevin Warsh pointed out in his speech last week.
The options market is betting on a 60% probability of the Fed raising the fed funds rate at their meeting in 10 days. The approaching midterm election is a sensitive time and a raise just before it would provoke an explosion of wrath from President Trump. Everyone knows this but anyone who can read a chart knows it would be the right thing to do. (The WSJ has written editorials about this. It’s no secret.)
The METAR for next week is sunny. Traders will be returning to the post-Labor Day reality we have all been conditioned as students to feel is a return to seriousness. I think next week will be calm. Of course, the METAR is a short-term forecast as always.
Wendy
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/pmi/august/
https://www.ismworld.org/supply-management-news-and-reports/reports/ism-pmi-reports/services/august/