Last week, rising interest rates continued to push most major market indexes lower, with NASDAQ being the notable exception. While higher rates remain a headwind, the markets continue to show pockets of strength as we enter the final quarter of the year.

Market Index Performance: Last Week and Year-to-Date

Rising Interest Rates Remain the Market’s Main Challenge

The standout corporate story of the week was Micron Technology’s earnings report. The company beat expectations on both the top and bottom lines.

However, the dominant market story remained interest rates.

Rates have now increased for five consecutive weeks, placing pressure on most sectors of the S&P 500. Information Technology and Communication Services have been the notable exceptions.

The S&P 500 declined by only about 0.5% during September, which on the surface appears relatively mild. However, the equal-weighted S&P 500 declined approximately 5%, according to The Wall Street Journal.

That difference is important.

The traditional S&P 500 is heavily influenced by the largest companies in the index. The equal-weighted index gives each company approximately the same importance. The significant gap between the two tells us that the strength of a relatively small number of large companies has been masking considerably more weakness beneath the surface.

The Job Market Continues to Cool

Last Friday’s employment number reported the economy adding only 29,000 jobs.

Perhaps equally important, the previous two months were revised downward by a combined 60,000 jobs.

Healthcare led the gains with approximately 17,000 new jobs, followed by construction with 11,000 and manufacturing with 9,000.

In simple terms, companies that make and build “stuff” generally gained jobs, while many companies in the service economy did not fare as well.

A gradually cooling labor market is something the Federal Reserve will be watching closely.

Could Higher Rates Finally Be Doing the Fed’s Work?

One potentially positive development last week was that investors reduced the odds of another Federal Reserve rate increase later this month.

Personally, I believe the Fed should sit tight.

Market interest rates have already risen substantially and are now at levels we have not seen in years. In many respects, the bond market may already be doing some of the Federal Reserve’s work for it.

There are several reasons behind the recent rise in rates, and oil prices are certainly one of the important inputs.

No one can predict what will happen with the U.S./Iran war or when we may begin to see relief in oil prices. However, if oil prices begin to reverse, inflation pressures could ease and interest rates may move back toward more manageable levels.

That would be a welcome development for both stocks and bonds.

Let’s hope it happens sooner rather than later, although I am certainly not holding my breath.

An Important Five Weeks Ahead: Earnings, the Fed, and the Midterms

The next five weeks or so should provide investors with a tremendous amount of information to digest.

Third-quarter corporate earnings:
Earnings reports begin the week of October 12.

Federal Reserve meeting:
The next Federal Reserve interest-rate announcement is scheduled for October 28.

Midterm Election Day:
November 3.

Each of these events has the potential to influence investor sentiment as we move deeper into the fourth quarter.

Are Stocks Overvalued?

As we enter the fourth quarter, one of the most common questions is whether stocks have simply become too expensive.

Interestingly, the numbers suggest valuations have actually improved.

The forward price-to-earnings ratio of the S&P 500 began the year at approximately 22 and now sits closer to 19.

Why have stocks become less expensive from a valuation standpoint even though the market is higher for the year?

Corporate profits have risen faster than stock prices.

Third-quarter corporate profits are currently projected to rise approximately 29% compared with the third quarter of 2025.

That does not mean stocks cannot decline, and the recent rise in interest rates remains an important concern. Strong corporate profitability provides a meaningful source of support for the market.

If third-quarter earnings come in near expectations and we can finally see market interest rates begin to top out, stocks could have an opportunity to move higher into year-end.

There are still plenty of uncertainties to navigate; however, the combination of improving valuations and strong corporate profits gives us some reason for cautious optimism as we enter the final quarter of 2026.

As always, we will continue to focus on the things we can control: maintaining appropriate diversification, managing risk, generating the income needed from portfolios, and making thoughtful adjustments as conditions change.

Please feel free to share the Retirement Report with friends, family and colleagues.

Thank you for reading!

Paul Levin, CFP®, ChFC®, RICP¹ , TPCP®
Managing Principal | Retirement Refined, LLC

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Important Information

Stock investing includes risks, including fluctuating prices and loss of principal. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All market data sourced from The Wall Street Journal, Oct 2, 2026.

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

1. RICP conferred by The American College ↩︎