Week in Review: September 26, 2025

September 30, 2025

Recap & Commentary

Markets ended the week modestly lower following comments from Fed Chair Jay Powell, revised GDP data, and inflation data, which collectively lessened the odds for additional Fed rate cuts.

On Tuesday, speaking at an event, Powell said “Near-term risks to inflation are tilted to the upside and risks to employment to the downside- a challenging situation.” Powell also reiterated that Fed policy is “not on a preset course” but instead will be based on “incoming data, the evolving outlook, and the balance or risks.” Though Powell effectively said nothing new from his post-meeting press conference the prior week, investors seemed disappointed that Powell did not offer more dovish comments regarding possible future policy decisions.

Revised 2Q GDP pointing to better economic growth, was greeted by investors as “good news is bad” regarding future Fed rate cuts. The thinking is that stronger economic growth would not warrant the same amount of cuts as if the economy were showing clearer signs of faltering.

Market expectations for two additional rate cuts by year end fell to 65%, down from 79% at the end of the prior week.

Economic Commentary

Core personal consumption expenditures (PCE), the Fed’s preferred inflation measure, rose 2.9% in August, inline with expectations and unchanged from July’s pace. Given recent upward pressure on consumer and producer prices, investors appeared relieved that core PCE did not accelerate further in August.

According to industry group S&P Global, both US manufacturing and service sector activity continued to expand in September, albeit at a slower pace than in August. Importantly, employment rose for a seventh consecutive month, though the pace of gains slowed in both sectors. Input prices continued to rise due to tariffs, though companies in both sectors reported difficulties passing along the higher costs due weakening demand and increasing competition.

New home sales surprised to the upside, surging 20% in August to the highest level since January 2022. Many economists expect the surge, which contradicted other recent housing data, to be revised lower in the coming months, reflecting the inherently volatile nature of housing sector data. Existing home sales, which account for ~85-90% of all home sales declined a modest 0.2% in August.

Headline durable goods orders rose 2.9%, better than the expected 0.3% decline. More importantly, a more core measure of underlying business demand rose 0.6% vs. an expected 0.1% decline.

Consumer sentiment fell in September largely due to a decline in consumers’ views on future economic conditions. Despite the decline, consumers continue to spend, as evidenced by personal spending which rose 0.6% in August, the largest monthly gain since March.

Second quarter GDP growth was revised up to 3.8%, largely due to upward revisions to consumer spending. The final estimate was far better than the initial and second estimates of 3.0% and 3.3% growth, respectively.

Of Note

President Trump announced new tariffs of 25%, 100%, and 30-50%, respectively, on imported trucks, pharmaceuticals, and furniture, respectively. Goods from countries that recently signed trade deals with the US are exempt.

Market Indices (As of 09/26/2025)

S&P 500 -0.3%
Small Caps -0.6%
Intl. Developed -0.4%
Intl. Emerging -1.1%
Commodities 2.2%
U.S. Bond Market -0.3%
10-Year Treas. Yield 4.18%
U.S. Dollar 0.6%
WTI Oil ($/bl) $65
Gold ($/oz) $3,790

The Week Ahead

  • Sept. Employment Report
  • JOLTs Report
  • ISM Manufacturing
  • ISM Services
  • Pending Home Sales
  • Initial Jobless Claims

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