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- Long-term Treasury yields climbed to multi-decade highs last week, creating a more meaningful headwind for stocks.
- Business activity surveys showed firm expansion across the United States, the eurozone, and the United Kingdom in September.
- Private payroll data showed a third straight report of improved hiring, and the broader labor market remained balanced.
1. Bond Yields Climb to Multi-Decade Highs
Long-term interest rates moved sharply higher last week, posing the biggest challenge to markets in recent months. The 10-year Treasury yield reached 5.17%, its highest intraday level since 2007, while the 30-year Treasury yield climbed to 5.49%, its highest intraday level since 2004.1 Several forces contributed to the move. Oil prices continued to rise amid the ongoing Middle East conflict. Futures market pricing reflected growing expectations for additional Federal Reserve rate increases.2 Demand for 5-year Treasuries was weak at Wednesday’s Treasury auction.1 Stronger-than-anticipated economic data reinforced expectations that rates will stay elevated for an extended period.
Solid growth and healthy corporate fundamentals suggest that current interest rates are not yet restrictive enough to end the expansion. Even so, the speed of the increase and elevated volatility in the bond market are creating a more meaningful headwind for equities. Any easing of geopolitical tensions that relieves pressure on energy prices could help stabilize bond markets. Until that happens, we believe upward pressure on yields is likely to continue.
2. Global Business Activity Stays Firm in September
Business activity surveys released last Wednesday showed steady global expansion. Purchasing Managers’ Index readings measure business conditions, with results above 50 indicating expansion and results below 50 indicating contraction. The eurozone composite index rose to 53.1, its highest reading since April 2023, supported mainly by improvement in the services sector.3 The United Kingdom composite index slipped modestly but remained in expansion territory at 51.7.3 In the United States, the composite index climbed to 58.4, the strongest level in more than five years.3 The common drawback across all three regions was persistent price pressure, as input costs increased alongside higher oil prices.3
In the United States, S&P Global estimates the survey data point to annualized growth of around 5% in September.3 Surveys may somewhat overstate underlying strength, but other indicators also suggest growth has accelerated in recent quarters. This backdrop should support corporate profits. Ahead of third-quarter earnings season, analysts expect S&P 500 earnings to grow about 32% this year, which, in our view, is a pace rarely seen outside a post-recession recovery.4 Resilient activity has helped lift international developed-market stocks over 10% and the S&P 500 Index 14% this year.5
3. Employment Data Indicates Firmer Job Growth
Private employers added an average of 20,000 jobs per week during the four weeks ending September 5th, up from 16,750 in the prior report.6 That marked the third consecutive report showing stronger job gains. The pace remains moderate by historical standards, but the direction has been consistent.
Other measures suggest the labor market is relatively balanced. The unemployment rate remained contained at 4.1% in August.7 Job openings totaled roughly 7.3 million, still above the 7.0 million Americans counted as unemployed.7,8 That relationship suggests demand for workers remains healthy without being strong enough to generate excessive wage pressure.
Steady employment gains matter because they support household income and, in turn, consumer spending, the largest component of economic activity. As long as hiring continues at this pace and layoffs stay limited, the labor market should remain a stabilizing influence, even as higher borrowing costs work their way through other parts of the economy.
Looking Ahead
- Personal Consumption Expenditures Price Index – Wednesday, September 30th
- ISM Manufacturing PMI – Thursday, October 1st
- Employment Situation Report – Friday, October 2nd
Why It Matters
With bond yields at multi-decade highs, this week’s releases will help determine whether upward pressure on rates continues. Wednesday’s inflation report covers personal consumption expenditures, the price measure the Federal Reserve watches most closely. In the prior reading, core prices rose 3.3% from a year earlier.9 Any acceleration in that rate would strengthen the case that policymakers have more work to do. Thursday’s ISM Manufacturing Index follows a prior reading of 54.6, and another month of solid expansion would reinforce the growth narrative that has contributed to higher yields.10 Friday’s employment report closes the week. Payrolls increased by 162,000 in August, with the unemployment rate at 4.1%.7 Investors will watch whether hiring momentum carried into September, since a firm labor market supports consumer spending but also gives the Fed less reason to ease.
For the period ending 9/25/26.
*Small-cap stocks are represented by the Russell 2000® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.
Sources
1 U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates and Treasury Auction Results, September 2026
2 CME Group, FedWatch Tool, accessed September 25, 2026, https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
3 S&P Global, Flash U.S., Eurozone, and U.K. Composite PMI, September 23, 2026
4 FactSet, Earnings Insight, September 2026
5 FactSet, Index Total Returns as of September 25, 2026
6 ADP Research, ADP National Employment Report, September 2026
7 U.S. Bureau of Labor Statistics, The Employment Situation, August 2026
8 U.S. Bureau of Labor Statistics, Job Openings and Labor Turnover Survey, July 2026
9 U.S. Bureau of Economic Analysis, Personal Income and Outlays, July 2026
10 Institute for Supply Management, Manufacturing PMI Report on Business, August 2026
Disclosures
Disclosures
Cary Street Partners is the trade name used by Cary Street Partners LLC, Member FINRA/SIPC; Cary Street Partners Investment Advisory LLC and Cary Street Partners Asset Management LLC, registered investment advisers. Registration does not imply a certain level of skill or training.
Any opinions expressed here are those of the authors, and such statements or opinions do not necessarily represent the opinions of Cary Street Partners. These are statements of judgment as of a certain date and are subject to future change without notice. Future predictions are subject to certain risks and uncertainties, which could cause actual results to differ from those currently anticipated or projected.
These materials are furnished for informational and illustrative purposes only, to provide investors with an update on financial market conditions. The description of certain aspects of the market herein is a condensed summary only. Materials have been compiled from sources believed to be reliable; however, Cary Street Partners does not guarantee the accuracy or completeness of the information presented. Such information is not intended to be complete or to constitute all the information necessary to evaluate adequately the consequences of investing in any securities, financial instruments, or strategies described herein. Nothing contained herein should be considered a solicitation to purchase or sell any specific securities or investment-related services.
Cary Street Partners is a broker-dealer and registered investment adviser and does not provide tax or legal advice; no one should act upon any tax or legal information herein without consulting a tax professional or an attorney.
We undertake no duty or obligation to publicly update or revise the information contained in these materials. In addition, information related to past performance, while helpful as an evaluative tool, is not necessarily indicative of future results, the achievement of which cannot be assured. You should not view the past performance of securities, or information about the market, as indicative of future results.
It should not be assumed that any of the securities transactions or holdings discussed were, or will prove to be, profitable.
Additional Disclosures: International and Foreign Securities, Fixed Income Investments, the Consumer Price Index, the Producer Price Index
Comparative Index Descriptions: The Standard & Poor’s (S&P) 500 Index, The Russell 2000® Index, The NASDAQ Composite Index, The MSCI EAFE Index, Dow Jones Industrial Average® (Dow Jones or DJIA), The Bloomberg Barclays US Aggregate Bond Index (US Agg Bond), The CBOE Volatility Index (VIX). CSP2026001_39
