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October Market Update
Fed Rate
The Federal Reserve raised interest rates in September for the first time since 2023. At its September 15–16 meeting, the Fed raised its benchmark interest rate, the federal funds rate, by a quarter of a percentage point, to a range of 3.75% to 4.00%. This is the rate banks charge each other for overnight loans, and it influences the rates people pay on mortgages, car loans and credit cards and the rates they earn on savings. All 12 voting members agreed. It was the Fed’s first increase since July 2023, after six cuts between September 2024 and December 2025. In its statement, the Fed said that “economic activity is expanding at a solid pace” and that “inflation remains elevated.” The Fed meets next on October 27–28. Markets currently put a 90.6% chance on the Fed leaving rates unchanged at that meeting and are pricing in a quarter-point increase at its December 9 meeting, according to the CME FedWatch tool.
Inflation
Prices rose faster in September, both for consumers and for businesses, and energy was the biggest contributor. Consumer prices rose 0.6% in September, after a 0.4% increase in August, and are up 3.7% from a year earlier, compared with 3.4% in August. Leaving out food and energy, whose prices tend to swing the most, prices rose 0.3% for the month and 2.6% over the year; this measure is often called “core” inflation. Energy prices rose 5.2% in September and are up 20.4% from a year ago, and gasoline rose 9.1% for the month and is up 34.2% over the year. Food prices were unchanged, grocery prices dipped 0.1%, and housing costs rose 0.4%. The prices businesses receive for the goods and services they sell, measured by the Producer Price Index, rose 1.3% in September and are up 6.3% from a year earlier, compared with a 5.6% yearly increase in August.
Oil
Oil prices rose over the past month, and the price of oil for immediate delivery is well above the prices usually quoted in the news. The spot price of West Texas Intermediate (WTI), the main U.S. benchmark, was $107.89 a barrel on October 20. The spot price is what a barrel costs for delivery now. That is up from an October low of $94.99 and 6.4% higher than a month earlier, when it was $101.44. The spot price of Brent, the main international benchmark, was $115.22. The oil prices usually quoted in the news are futures prices, which are contracts to buy oil for delivery in the coming months, and they are lower: Brent futures traded above $111 a barrel on October 22. In its October 14 report, the International Energy Agency said Brent futures had risen 13% since the start of September, to around $107 a barrel, while prices for physical oil cargoes had risen much more, with the North Sea Dated benchmark up 43% to $134. The agency pointed to an escalation in attacks on energy facilities and oil tankers in the region, including the September 11 bombing of Saudi Arabia’s East-West Pipeline, and continued disruptions to Middle East exports. On October 21, the State Department ordered non-emergency U.S. government employees and their families to leave Saudi Arabia, saying that “Iranian-supported Houthis have increasingly engaged in hostilities against Saudi Arabia.” The same day, asked whether the United States was negotiating with Iran, President Trump told reporters, “No, I think we’re not negotiating.”
Labor Market
Hiring slowed in September, and the unemployment rate rose to 4.2% as more people joined the workforce than found jobs. Employers added 29,000 jobs in September, down from 133,000 in August. The unemployment rate rose to 4.2% from 4.1%. The share of adults who are working or looking for work rose to 61.8%, and the share of adults who have a job rose to 59.2%.
Markets
Stocks were mixed over the past month, and the S&P 500 is less than 1% below its record high. The S&P 500, an index of 500 of the largest U.S. companies, closed at 7,757.17 on October 21. That is down 0.1% from a month earlier, up 13.3% since the start of the year, and 0.8% below its record close of 7,818.93 on October 6. Over the past month, the technology-heavy Nasdaq Composite fell 1.5%, while the Dow Jones
Industrial Average, which tracks 30 large companies, rose 1.6%. Companies have begun reporting their results for July through September.
Interest rates on U.S. government bonds rose over the past month, especially on longer-term bonds, and mortgage rates remain above 7%. Treasury yields are the interest rates the U.S. government pays to borrow money. The 10-year Treasury yield, which mortgage rates tend to follow, rose to 5.12% on October 20 from 5.01% a month earlier. The 2-year yield, which closely tracks expectations for Fed policy, rose to
4.79% from 4.76%, and the 30-year yield rose to 5.42% from 5.34%. The average 30-year fixed mortgage rate was 7.41% last week, down from 7.50% the week before, according to the Mortgage Bankers Association, and mortgage applications fell 5.3% from the prior week.
Manufacturing
Manufacturing kept growing in September, but the prices factories pay for materials rose faster. The ISM Manufacturing PMI (Purchasing Managers Index) is a monthly survey of purchasing managers at U.S. factories. It is measured on a scale of 0 to 100: a reading above 50 means manufacturing is growing, and below 50 means it is shrinking. The index was 54.5 in September, down slightly from 54.6 in August. New orders rose
to 55.3 from 53.7, production fell to 56.7 from 58.3, and employment rose to 52.7 from 51.2. ISM’s measure of the prices factories pay rose to 77.9 from 71.1; ISM attributed the increase to higher steel and aluminum prices, tariffs on many imported goods, and higher prices for petroleum-based products as a result of the Middle East conflict. Deliveries from suppliers have been slower for 10 months, factories’ inventories shrank (48.6, down from 50.6), and the backlog of unfilled orders grew (56.4, up from 51.8). Susan Spence, Chair of ISM’s Manufacturing Business Survey Committee, said 60% of the comments from survey respondents were negative; among those, pricing volatility was mentioned in 46%, tariffs in 34%, the Iran war in 30% and longer delivery times in 21%.
Midterm Elections
The midterm elections are on November 3. Historically, stocks have been more volatile in midterm years and have usually risen in the year after the vote. Capital Group, which studied S&P 500 returns back to 1931, found that midterm years have tended to bring lower average returns and bigger price swings than other years. Fidelity found that since 1961, the S&P 500 has fallen an average of 19% from its high to its low at some point during midterm years; this year, stocks fell 9% from peak to trough in March. The 12 months after a midterm election have historically been positive: since 1950, the S&P 500 has gained an average of 15.4% in the year after a midterm, with no negative year, according to Capital Group, and Fidelity found the index rose in the 12 months after 95% of midterms since 1938. Fidelity also found that markets have reacted more to changes in policy uncertainty than to which party wins. So far in 2026, the S&P 500 is up 13.3%. However, it is important to remember that past performance does not guarantee future results.
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