Capitalize on today's evolving market dynamics.
With changes to taxes and interest rates, it's a good time to meet with a wealth advisor.
Market News
Market analysis
October 19, 2026
Inflation accelerated and geopolitical risks increased, but supportive economic growth, corporate profits, bonds and income-producing real assets offer investors a mixed but resilient investment backdrop.
Number of the week
6.3%
The increase in the Producer Price Index in September compared to a year earlier, the largest increase in more than four years.
Term of the week
Producer Price Index (PPI) – A family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. The PPI measures price changes from the perspective of the seller. This contrasts with the Consumer Price Index, which measures price change from the purchaser’s perspective.
Quote of the week:
Higher energy costs pushed U.S. inflation upward in September. The Consumer Price Index rose 3.7% from a year earlier, up from 3.4% in August and above forecasts. Prices excluding food and energy increased 2.6%, compared with 2.4% the prior month. Businesses faced sharper cost increases: The Producer Price Index posted its largest monthly gain in more than four years and rose 6.3% from a year earlier. Companies may pass some of those higher costs to customers.
Bill Merz, CFA, Senior Vice President, Head of Capital Markets Research and Portfolio Construction, U.S. Bank
U.S. Bank Asset Management Group
Daniel Farley, CFA
Chief Investment Officer
Kaush Amin, CFA
Head of Private Market Investing
Chad Burlingame, CFA, CAIA
Co-Head of Public Markets Manager Research
Thomas Hainlin, CFA
National Investment Strategist
Robert Haworth, CFA
Senior Investment Strategy Director
William Merz, CFA
Head of Capital Markets Research
William Northey, CFA
Senior Investment Director
Terry Sandven
Chief Equity Strategist
Global economy
Quick take: Inflation accelerated in September as energy costs rose, and attacks on major shipping routes increased supply risks. Manufacturing improved and limited layoffs helped households keep spending despite uneven pressures.
- Energy supply risks increased as regional conflicts intensified. Iran struck several vessels in the Strait of Hormuz, sinking a container ship and further disrupting a route that normally carries about one-fifth of the world’s oil. Iran-backed Houthi militants expanded attacks in Saudi Arabia and hit the national oil company’s headquarters. Separately, a Russia-Ukraine energy ceasefire ended, and Ukraine announced plans to resume strikes on Russian refineries. Continued disruptions could keep oil and transportation costs elevated.
- Higher energy costs pushed U.S. inflation upward in September. The Consumer Price Index rose 3.7% from a year earlier, up from 3.4% in August and above forecasts. Prices excluding food and energy increased 2.6%, compared with 2.4% the prior month. Businesses faced sharper cost increases: The Producer Price Index posted its largest monthly gain in more than four years and rose 6.3% from a year earlier. Companies may pass some of those higher costs to customers.
- U.S. factory activity strengthened, although small businesses remained cautious. An October survey of New York manufacturers reached its highest reading since December 2021, with new orders and shipments increasing. U.S. industrial production rose 0.7% in September, exceeding forecasts. Small business confidence weakened amid high operating and borrowing costs, but sales expectations improved. The Federal Reserve’s regional business survey reported slight to moderate growth in nine of 12 districts, pointing to continued economic expansion.
- A steady domestic job market helped sustain consumer spending. Retail sales rose 0.8% in September, although higher gasoline prices drove much of the gain. Sales excluding volatile categories such as gasoline and autos increased just 0.1%. The Federal Reserve’s (Fed) regional Beige Book survey found that higher-income households led spending, while lower- and middle-income consumers grew more cautious. Employment changed little, and weekly unemployment claims remained low. Limited layoffs continue to support household income as families manage higher prices.
Equity markets
Quick take: Stocks generally declined last week as investors moved away from technology and toward sectors with steadier near-term earnings. Early third quarter results exceeded forecasts, but higher rates and oil prices created risks.
- Technology weakness drove U.S. large-cap stocks lower, but most sectors advanced. The S&P 500 fell 1.9% last week, with Information Technology declining 6.4%, while technology-heavy emerging markets fell 5.1%. Mid-cap stocks declined 1.2%, small-company stocks fell 3.0% and developed international stocks gained 1.4%. Seven of 11 S&P 500 sectors rose as investors rotated into both cyclical and defensive areas. Consumer Staples and Energy gained about 5%, while Healthcare, Materials, Utilities and Financials also advanced. Investors moved away from Technology rather than retreating broadly from stocks.
- Strong profit forecasts continue to support stock prices. Analysts expect S&P 500 earnings to grow 32% in 2026 and 16% in 2027. The index trades at roughly 21 times expected 2026 earnings and 18 times expected 2027 profits. Both measures exceed the 35-year average of 16.8 times “next 12 months” expected profits but remain below earlier market peaks.
- Early third quarter corporate reports are exceeding already-high expectations. Through Friday, 9% of S&P 500 companies had reported results. Sales grew 13.8%, compared with a 12.1% estimate, while earnings increased 47.3% versus a 29.4% forecast. Another 15% of companies will report this week, including Capital One, American Express, Netflix, Meta Platforms, Texas Instruments and Union Pacific. Their results should provide a broader view of consumer demand, business spending and cost pressures.
- Consumer demand remains healthy, but higher fuel costs are pressuring profits. Delta Air Lines reported strong passenger demand, including premium seating, while fuel costs 62% above year-earlier levels reduced profitability and tempered its outlook. Banks posted mixed results, although customer spending remains healthy, late loan payments are low, and deposit and investment balances are growing. High employment, wage gains and artificial intelligence investment support growth, while oil prices, inflation and borrowing costs remain risks.
- Investors demand clearer evidence that artificial intelligence spending will pay off. The 10-year Treasury yield ended last week near 5.1%, increasing scrutiny of companies whose expected profits lie further in the future. Investors increasingly want large artificial intelligence investments to produce measurable revenue, profits and cash flow. That shift widened performance differences among technology companies and broadened market leadership beyond the sector.
Bond markets
Quick take: Bonds gained even after hotter inflation reports last week as stock market weakness increased demand for U.S. Treasuries. Comments from Federal Reserve officials keep another 2026 interest rate increase under consideration.
- Treasury yields fell last week, and longer-term bonds posted the strongest gains. Yields declined across Treasury maturities despite September consumer and producer inflation results that exceeded forecasts. A late-week decline in artificial intelligence-related stocks prompted investors to seek the relative safety of U.S. government bonds, pushing yields lower. Bond prices move in the opposite direction of yields, and longer-term bonds react more sharply to interest rate changes. As a result, longer-term Treasuries gained 2.6%, compared with a 0.2% increase for short-term Treasuries.
- Federal Reserve officials left room for another rate increase this year. New York Fed President John Williams said he still expects one more increase in 2026 but sees no need for additional moves if inflation slows toward the Fed’s 2% goal next year. Governor Christopher Waller said higher long-term rates are already limiting demand for homes and vehicles. Cleveland Fed President Beth Hammack called for clearer explanations of how officials interpret economic data, while Chair Kevin Warsh offered no new direction.
- Investors expect a gradual path for additional rate increases. At the end of last week, financial markets priced in about a 15% chance of a quarter-point increase at the Fed’s October meeting and anticipated roughly three increases through 2027. That projected pace exceeds the path Williams described. Incoming inflation, employment and spending reports will shape those expectations, while recent increases in longer-term borrowing costs may reduce the need for the Fed to move as quickly.
- Most major bond categories advanced last week as Treasury yields declined. A broad index of high-quality U.S. bonds returned 0.8%, high-quality corporate bonds gained 1.0%, and municipal bonds rose 1.3%. Lower-quality municipal bonds advanced 1.6%, while lower-quality corporate bonds slipped slightly as stocks declined. Bank loans and other investments whose income adjusts with short-term interest rates changed little. The broad gains showed how government and high-quality bonds can help steady diversified portfolios during stock market weakness.
Real assets
Quick take: Lower Treasury yields lifted publicly traded real estate and infrastructure last week. Oil prices rose on supply concerns, while natural gas and metals declined, leaving broad commodity returns roughly flat.
- Publicly traded real estate gained, but property-type results diverged. Real estate investment trusts rose 1.3% last week as lower Treasury yields increased the appeal of their income. Healthcare properties gained more than 3%, while retail and self-storage properties rose 2.6% and 3.2%, respectively. Industrial properties fell 2.2% despite better-than-expected third quarter results from the group’s largest company. Data center properties declined 2.8% alongside artificial intelligence-related stocks but remain up 23.7% for the year. Broad real estate investments have returned 9.9% in 2026.
- Global infrastructure rose 1.7%, led by utility companies. Utilities gained 1.9%, with lower bond yields making their dividends more attractive. Industrial companies slipped with the broader stock market decline. North American energy infrastructure, which consists mainly of oil and gas pipelines, returned 1.8% as U.S. oil prices climbed and is up 26.9% this year. Pipeline companies generally earn revenue from the volume of fuel they transport rather than day-to-day commodity price changes.
- Oil gains offset declines in natural gas and metals. Attacks on Middle East shipping renewed supply concerns and lifted oil prices. West Texas Intermediate crude, the U.S. benchmark, rose 10.8%, while Brent crude, the global benchmark, gained 4.7% and natural gas fell 3.1%. Precious metals also declined despite heightened geopolitical tensions, with silver down 6.4% and gold down 0.8%. Copper, which often moves with expectations of global industrial demand, fell 1.9%. Overall, broad commodity returns were roughly flat for the week.
- Real assets continued to provide distinct sources of return. Broad commodities have returned 40.2% this year, led by oil, while real estate and infrastructure have benefited from income and demand for essential facilities and networks. Their prices can still change quickly as interest rates, economic growth and supply conditions shift. Within a diversified portfolio, the different forces driving these assets may provide income and help offset periods when inflation weighs on stocks and bonds.
This information represents the opinion of U.S. Bank. The views are subject to change at any time based on market or other conditions and are current as of the date indicated on the materials. This is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable but is not guaranteed as to accuracy or completeness. U.S. Bank is not affiliated or associated with any organizations mentioned.
Based on our strategic approach to creating diversified portfolios, guidelines are in place concerning the construction of portfolios and how investments should be allocated to specific asset classes based on client goals, objectives and tolerance for risk. Not all recommended asset classes will be suitable for every portfolio. Diversification and asset allocation do not guarantee returns or protect against losses.
Past performance is no guarantee of future results. All performance data, while obtained from sources deemed to be reliable, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for direct investment. The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is one of the most frequently used statistics for identifying periods of inflation or deflation. Producer Price Index (PPI) – A family of indexes that measures the average change over time in selling prices received by domestic producers of goods and services. The PPI measures price changes from the perspective of the seller. This contrasts with the Consumer Price Index, which measures price change from the purchaser’s perspective.
Equity securities are subject to stock market fluctuations that occur in response to economic and business developments. International investing involves special risks, including foreign taxation, currency risks, risks associated with possible differences in financial standards and other risks associated with future political and economic developments. Investing in emerging markets may involve greater risks than investing in more developed countries. In addition, concentration of investments in a single region may result in greater volatility. Investing in fixed income securities is subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investment in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities. Investments in high yield bonds offer the potential for high current income and attractive total return but involve certain risks. Changes in economic conditions or other circumstances may adversely affect a bond issuer’s ability to make principal and interest payments. The municipal bond market is volatile and can be significantly affected by adverse tax, legislative or political changes and the financial condition of the issues of municipal securities. Interest rate increases can cause the price of a bond to decrease. Income on municipal bonds is free from federal taxes but may be subject to the federal alternative minimum tax (AMT), state and local taxes. There are special risks associated with investments in real assets such as commodities and real estate securities. For commodities, risks may include market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors. Investments in real estate securities can be subject to fluctuations in the value of the underlying properties, the effect of economic conditions on real estate values, changes in interest rates and risks related to renting properties (such as rental defaults).
©2026 U.S. Bank
Insights from our experts
How we approach your long-term investing success
We use a data- and process-driven three step methodology to develop an investment strategy unique to you.
Q3 2026 investment outlook
Solid growth endures as policy and geopolitics shift.
Analysis: Assessing inflation’s impact
Persistently higher prices continue to weigh on consumers and policymakers alike.
Start of disclosure content
Disclosures
Start of disclosure content
Start of disclosure content
Equal Housing Lender. Deposit products offered by U.S. Bank National Association. Member FDIC. Credit products offered by U.S. Bank National Association and subject to normal credit approval.