Stocks on Track To Finish September Slightly Positive as Cool PCE Data Curbs Fed Hike Odds: Sept. 30, 2026

Stocks are on track to finish the seasonally unfriendly month of September slightly positive after cooler-than-anticipated PCE inflation data curbed Fed hike odds this morning. But the overall economic calendar was largely supportive of equities and the corporate earnings outlook, as better-than-expected hiring figures from ADP coincided with a big beat on August consumer spending as well as an upward revision to second-quarter GDP. The combination of reports has strengthened investor confidence that the US central bank may become less hawkish and it has lifted optimism about the cycle’s ability to manage much loftier interest rates by remaining resilient and avoiding a slowdown. Fixed income trading is bifurcated, however, as softening cost forces are helping the short end of the Treasury curve, while elevated oil prices and buoyant growth projections hurt the longer tenors. Still, yields are off their frightening highs from yesterday, which saw the 2-, 10- and 30-year maturities barely miss the 5%, 5.30% and 5.65% altitudes. In stocks, the four major domestic benchmarks are advancing although categorical participation is split, with 6 of the 11 principal sectors climbing on the session and premiums on volatility protection instruments sliding due to the risk-on day. Rebounding momentum on Wall Street is additionally benefitting cryptocurrencies and prediction markets, but commodities apart from crude are sinking.

ADP Reports Strong Month for Labor Market

Hiring rebounded in September despite growing signs of artificial intelligence weighing on white-collar employment. ADP’s jobs report signaled a gain of 90k positions across the US private sector last month, exceeding the 70k consensus expectation and 36k from August. The strong print occurred even as finance, professional/business services and mining sectors trimmed rosters by 16k, 11k and 1k. Turning to the leaders, the education/health services, leisure/hospitality, manufacturing and construction categories boosted headcounts by 55k, 22k, 17k and 15k. Other services and information registered slower increases of 6k and 3k while trade/transportation/utilities was flat. Small, mid-sized and large businesses that range from 1-49, 50-499, and 500+ workers, respectively, experienced employee growth of 23k, 54k and 14k. Compensation trends were generally steady, with the overall workforce and job stayers median gross pay rising 4.7% and 4.4% year over year (y/y), the same rate as the prior print. Among job changers, income growth decelerated slightly from 7.4% in August to 7.3% y/y.

August Inflation Was Lower Than Expected

Price pressures were cooler-than-feared last month while the economic expansion accelerated thanks to resilient shoppers. This morning’s Personal Income and Outlays publication depicted a 0.9% month over-month (m/m) increase in cash register activity, reaching a five-month high while exceeding the 0.8% median estimate and the 0.1% from July. On a less optimistic note, the savings rate plunged to 4.1%, nearly a four-year low, or since November 2022, with incomes rising only 0.2%, which was below the anticipated 0.4% and the prior print’s 0.3%. The inflation segment of the report registered overall and core cost increases of 0.3% and 0.2% m/m, as well as 3.4% and 3% y/y, with the annualized figures coming in under the 3.7% and 3.3% expected while matching the previous period’s result. For the monthly numbers, both arrived a tenth of a percent below the 0.4% and 0.3% consensus projections but ramped from the 0.1% in the preceding release.

AI and Consumer Spending Drive Upgraded GDP Revision

Second-quarter economic growth was upgraded from 1.5% to 2.2% this morning, as the revision benefitted from better consumer spending and business AI investment numbers than originally thought. Additionally, but to a lighter degree, a slimmer trade deficit and heavier government expenditures bolstered the Gross Domestic Product (GDP) print.

September Illustrates Strong Demand For Stocks

Stocks weathered seasonal headwinds amidst a surge in yields this month, as healthy economic data continued to signal a buoyant corporate earnings outlook that has investors satisfied with current valuations. Despite just notching a modest gain for September, the positive return against the backdrop of a Fed hike and soaring long-end interest rates is emblematic of the insatiable demand for shares of US companies. Going forward, we face risks of a blue wave in Congress this November that could attempt to add regulatory headwinds for markets in the coming months; however, that would be more than offset with a potential resolution to the Middle East conflict, as bulls have a plethora of levers to pull to keep the rally going. For now, tomorrow is likely to be a quieter day on Wall Street with investors gearing up for Jobs Friday, where a beat on nonfarm payrolls would likely serve more pain to the Treasury complex, although numbers in-line or beneath expectations are poised to offer relief for fixed-income.

International Roundup

China’s Economic Activity Strengthened This Month

Economic activity in China strengthened considerably this month, according to data from both the National Bureau of Statistics and S&P Global. While the NBS depicted the country as moving from contraction to expansion, the S&P Global data, based on a different methodology, implies that the country’s ongoing economic expansion is accelerating. The official Chinese Composite Purchasing Managers Index climbed from a contraction level of 49.5 in August to 50.7. The contraction-expansion threshold is 50. The manufacturing and non-manufacturing versions both strengthened, climbing from 49.8 and 49 to 50.1 and 50.2. The manufacturing gauge, which has benefited from strong export demand, matched the economist consensus estimate while the non-manufacturing indicator surpassed the expected 49.2 level. In addition to strong orders, the manufacturing sector enjoyed reading above the contraction level for production and suppliers’ delivery times while raw materials inventory and employment results remained in contraction. The S&P Global RatingDog PMIs were also encouraging with the manufacturing and services PMIs climbing from 51.5 and 51.4 to 52.1 and 51.6. Both surpassed the economist consensus estimates for manufacturing and services to hit 51.7 and 51.3. The RatingDog manufacturing index, meanwhile, hit its highest level in five months and recorded its 10-consecutive print depicting expansion. A solid upturn in sales leading to a rise in production and a return to payroll additions boosted the results while selling prices and cost pressures climbed. Sentiment among manufacturers remained positive and firms were generally optimistic that production would ascend in the next 12 months. Confidence improved from August but was still below the PMI’s long-term average. Survey respondents said they anticipate better global economic conditions.  In the services sector, employment expanded for the fifth consecutive month, new business expanded at its fastest rate since June and output prices fell. Export demand also strengthened.