Before we get to last week's macro wrap, I thought I'd share via video some of what has our immediate attention as it relates to the near-term general market setup:
And here's your summary of the latest PWA Index scoring, followed by last week's wrap*:
Good News Has a Price*
Week of September 21, 2026
The economy delivered nearly every piece of good news it could this week. Business surveys showed the fastest growth in more than five years, orders for business equipment surged, and layoffs stayed near half-century lows. The bond market treated all of it as a reason to push interest rates higher. The 10-year Treasury yield closed at its highest level since 2007, and mortgage rates crossed 7% for the first time in almost two years. A strong economy and cheap money are not arriving together this time, and that trade-off now sets the terms for the rest of the year.
The week in brief
- US business activity grew at its fastest pace since mid-2021. A widely followed survey of purchasing managers jumped to its highest reading in more than five years. Manufacturing posted its biggest improvement since 2022.
- The Atlanta Fed's running estimate of third-quarter growth held at 5.0% annualized.
- The 10-year Treasury yield rose about 17 basis points to 5.16%, its highest close since 2007. The 30-year reached its highest level since 2004.
- The market's expectation of future inflation barely moved. Almost the entire rise in yields came from expectations of stronger growth and a longer stretch of Fed tightening.
- The average 30-year mortgage rate reached 7.03%, its fifth straight weekly increase. New home sales beat forecasts, but on the back of falling prices.
- Oil fell about 8% in the US on hopes of a US–Iran agreement. Shipping through the Strait of Hormuz has not yet resumed in any meaningful way. Diesel set another record.
- Stocks rose to within 1% of their high, led almost entirely by technology.
- Our internal conditions gauge rose to +7.46 from +5.97, better than about 96% of the past four years.
- What matters next: August inflation and household spending on Wednesday, September 30, and September employment on Friday, October 2.
Why good news pushed rates up
Normally, rising yields raise a question about inflation: are investors demanding more because they expect prices to keep climbing? This week that was not the story.
The market's priced expectation of inflation over the next ten years rose by about two hundredths of a percentage point. The 10-year yield rose by about seventeen. Almost all of the move came from what economists call real yields: the return investors demand after inflation. That happened in a week when diesel set a record and manufacturers reported their fastest input-cost increases in four years.
Put simply, the bond market is saying the economy is strong enough that the Federal Reserve will keep rates higher for longer, and it trusts the Fed to keep inflation in check while it does. Futures markets now put the odds of another rate increase at the October 28 meeting at roughly 70%, up from about 55% a week ago.
There are two readings here. The reassuring one: long-term inflation expectations are holding firm through an energy shock, which is not a given. The less comfortable one: higher real rates tighten financial conditions just as surely as higher inflation expectations would. They show up in mortgage rates, corporate borrowing costs and the valuation investors will pay for future earnings.
There was also a fiscal thread. An auction of five-year Treasury notes drew weak demand. And long-term yields rose to multi-decade highs even though the Treasury has been buying back older long-dated bonds to support that part of the market. Government financing needs have not gone away. They were simply not the main driver this week.
Housing: more sales, at a cost
Mortgage rates crossed 7% this week for the first time since January 2025. The gap between mortgage rates and Treasury yields widened sharply the week before. This week both rose together, so it is not yet clear whether that wider gap will persist. Mortgage applications fell for a third straight week, and refinancing activity is 62% below a year ago.
New home sales, however, came in well above expectations: 684,000 at an annual pace against forecasts near 615,000, with July revised higher. How builders got there matters. The average price of a new home sold in August was 8.8% lower than a year ago. More than a third of builders are cutting prices outright, and two-thirds are offering incentives. Builders are clearing inventory by giving up margin. Unsold new homes still stand at eight and a half months of supply, well above a balanced market.
That is the same pattern we have described among consumers generally: volumes holding up while profit margins absorb the pressure.
Oil fell. The oil problem did not
US crude dropped roughly 8% on the week after American and Iranian negotiators met directly for the first time since June. They discussed a phased arrangement that could reopen the Strait of Hormuz. Talk of a possible US ban on diesel exports added to the pressure on domestic crude. International crude, meanwhile, finished the week slightly higher. The gap between US and international oil prices is the widest since May.
The physical picture has not changed. Satellite tracking still shows only a handful of vessels transiting the strait each day, against roughly 85 before the conflict. Retail diesel set another record this week at $6.53 a gallon. Markets are pricing the possibility of a resolution. Until ships are moving, the supply problem is still there. We continue to watch actual flows, not diplomatic headlines.
A two-sector market at a 19-year high in yields
The S&P 500 rose 1.2% and finished within 1% of its all-time high. Investor fear, as measured by options markets, sits near its lowest levels of the year. Enthusiasm around artificial intelligence did much of the lifting.
Underneath the index, the picture is narrower. Only technology and energy have outperformed the broad market this year. This week, utilities, financials, consumer staples and consumer-discretionary companies all lost further ground. Utilities had their second consecutive week as the weakest sector, which is what one would expect from interest-rate-sensitive businesses when long-term yields jump.
A market near its high, carried by a narrow group of companies, with 10-year yields above 5%, is priced for the good news to keep coming. It can keep coming for a while. But a stock market this dependent on a few sectors is more sensitive to a disappointment in those sectors than the headline level suggests.
What our internal gauge says
Our internal conditions gauge rose to +7.46 from +5.97, better than about 96% of the past four years.
One of the 67 measures changed: new home sales improved, for the reasons and with the caveats above. A second measure, which tracks how economic data is coming in against expectations, rose to one of its strongest readings of the cycle. It did not move the gauge this week because it has no pre-written threshold for an upgrade, and we would rather set that threshold deliberately than move the reading on a good week.
The gauge reads economic conditions, and conditions are strong. It is not a forecast of what the Federal Reserve or the bond market will do with that strength. This week the two pulled in opposite directions.
What we are watching
Wednesday, September 30 brings August personal spending, income, the savings rate and the Federal Reserve's preferred inflation measure, all on the same morning. The same day brings the final revision to second-quarter GDP.
Thursday, October 1 brings the national manufacturing survey, which has a high bar to clear after this week's regional and private readings.
Friday, October 2 is the September jobs report. With layoffs this low and business surveys this strong, a firm number would reinforce the case for another rate increase in October.
Wednesday, October 28 is the next Federal Reserve decision, now priced at roughly 70% for a hike. As before, the language will tell us more than the decision.
This commentary is provided for informational and educational purposes only and does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation regarding any security, sector, or investment strategy. The views expressed reflect the opinions of Private Wealth Advisors as of the date written and are subject to change without notice. Information has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Past performance is not indicative of future results, and all investing involves risk, including the possible loss of principal. Nothing contained herein should be construed as personalized investment, tax, or legal advice.
*The section titled "Good News Has a Price" was drafted with the assistance of artificial intelligence tools under the direction and editorial review of Marty Mazorra, Chief Investment Officer of Private Wealth Advisors. All analysis, conclusions, and final content are his own.
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