The Inflation Verdict Is In – and Markets Are Listening
This week, U.S. capital markets were anchored to a single question: Would August inflation data give the Federal Reserve enough cover to hold rates steady at its September 15-16 meeting – or seal the case for the first rate hike since 2023?
On Friday, the Bureau of Labor Statistics provided the answer. The Consumer Price Index rose 3.4% year-over-year in August, matching consensus, while core CPI – which strips out food and energy – increased 0.3% month-over-month, a tenth of a percentage point above what analysts had expected. That small miss mattered. By Friday afternoon, futures markets were pricing an approximately 85% probability of a 25-basis-point rate increase at next week’s FOMC meeting, up from roughly 70% just before the report was released.
What We Observed This Week
We observed a market that spent most of the week under pressure, then recovered sharply on Friday. The S&P 500 fell in four straight sessions before the CPI release, weighed down by a confluence of factors: oil prices pushed Brent crude above $100 per barrel on renewed Middle East tensions, Treasury yields climbed as rate-hike expectations increased, and investor sentiment turned cautious heading into a pivotal inflation print. By Thursday’s close, broad equity indices were down between 1.5% and 3% for the week.
Friday changed the tone. Oil prices declined nearly 3%, taking some pressure off yields. The CPI report came in largely as expected – no upside shock beyond the core number – and markets interpreted that as partial relief. The S&P 500 climbed approximately 0.9%, and the Dow and Nasdaq each rose about 1%, clawing back a significant portion of the week’s earlier losses. For the full week, however, the major averages still ended lower: the S&P 500 -0.8%, the Nasdaq -0.7%, and the Dow -1.6%.
Under the surface, sector leadership was telling. Energy was the best-performing sector, directly benefiting from elevated oil prices. Artificial intelligence-related hardware also posted relative strength within technology. Healthcare was the week’s weakest sector, declining more than 3% on disappointing clinical trial results and earnings updates, while consumer discretionary also lagged, pressured by weakness in travel, housing, and restaurant stocks. This kind of rotation – away from consumer spending and toward energy and select technology – tends to accompany environments where inflation remains elevated and the cost of capital is rising.
What We Are Watching
We are watching next week’s Federal Reserve decision closely. With the federal funds rate currently in a 3.50%-3.75% target range and the Fed’s preferred inflation gauge still running above the 2% target, the committee faces a genuine policy dilemma: inflation that has not fully cooperated, an economy that added a surprisingly strong 162,000 payrolls in August, and rising energy prices that could keep headline CPI elevated even if core trends moderate. Fed Chair Kevin Warsh and the majority of policymakers have signaled a data-dependent posture, and the data this week leaned hawkish.
Regardless of whether the Fed hikes or holds next week, the broader lesson for long-term investors is unchanged: interest rate environments shift gradually, and well-constructed financial plans account for that possibility rather than betting on any single meeting outcome. Elevated volatility around central bank decisions is not a signal to abandon strategy – it is a reminder of why having one matters.
Disclaimer: This content is for educational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security. The information provided reflects general market commentary based on publicly available information and is not tailored to the financial situation of any individual. Investing involves risk, including the possible loss of principal. Past market performance is not indicative of future results. Guardant Wealth Advisors, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training.
Weekly Market Commentary: September 8 – 11, 2026
The Inflation Verdict Is In – and Markets Are Listening
This week, U.S. capital markets were anchored to a single question: Would August inflation data give the Federal Reserve enough cover to hold rates steady at its September 15-16 meeting – or seal the case for the first rate hike since 2023?
On Friday, the Bureau of Labor Statistics provided the answer. The Consumer Price Index rose 3.4% year-over-year in August, matching consensus, while core CPI – which strips out food and energy – increased 0.3% month-over-month, a tenth of a percentage point above what analysts had expected. That small miss mattered. By Friday afternoon, futures markets were pricing an approximately 85% probability of a 25-basis-point rate increase at next week’s FOMC meeting, up from roughly 70% just before the report was released.
What We Observed This Week
We observed a market that spent most of the week under pressure, then recovered sharply on Friday. The S&P 500 fell in four straight sessions before the CPI release, weighed down by a confluence of factors: oil prices pushed Brent crude above $100 per barrel on renewed Middle East tensions, Treasury yields climbed as rate-hike expectations increased, and investor sentiment turned cautious heading into a pivotal inflation print. By Thursday’s close, broad equity indices were down between 1.5% and 3% for the week.
Friday changed the tone. Oil prices declined nearly 3%, taking some pressure off yields. The CPI report came in largely as expected – no upside shock beyond the core number – and markets interpreted that as partial relief. The S&P 500 climbed approximately 0.9%, and the Dow and Nasdaq each rose about 1%, clawing back a significant portion of the week’s earlier losses. For the full week, however, the major averages still ended lower: the S&P 500 -0.8%, the Nasdaq -0.7%, and the Dow -1.6%.
Under the surface, sector leadership was telling. Energy was the best-performing sector, directly benefiting from elevated oil prices. Artificial intelligence-related hardware also posted relative strength within technology. Healthcare was the week’s weakest sector, declining more than 3% on disappointing clinical trial results and earnings updates, while consumer discretionary also lagged, pressured by weakness in travel, housing, and restaurant stocks. This kind of rotation – away from consumer spending and toward energy and select technology – tends to accompany environments where inflation remains elevated and the cost of capital is rising.
What We Are Watching
We are watching next week’s Federal Reserve decision closely. With the federal funds rate currently in a 3.50%-3.75% target range and the Fed’s preferred inflation gauge still running above the 2% target, the committee faces a genuine policy dilemma: inflation that has not fully cooperated, an economy that added a surprisingly strong 162,000 payrolls in August, and rising energy prices that could keep headline CPI elevated even if core trends moderate. Fed Chair Kevin Warsh and the majority of policymakers have signaled a data-dependent posture, and the data this week leaned hawkish.
Regardless of whether the Fed hikes or holds next week, the broader lesson for long-term investors is unchanged: interest rate environments shift gradually, and well-constructed financial plans account for that possibility rather than betting on any single meeting outcome. Elevated volatility around central bank decisions is not a signal to abandon strategy – it is a reminder of why having one matters.
Disclaimer: This content is for educational purposes only and does not constitute personalized investment advice or a recommendation to buy or sell any security. The information provided reflects general market commentary based on publicly available information and is not tailored to the financial situation of any individual. Investing involves risk, including the possible loss of principal. Past market performance is not indicative of future results. Guardant Wealth Advisors, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training.
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