👋 ICYMI
A month ago, the economy added 162,000 jobs and the stock market fell. This week, that August number was revised down to 133,000. September came in at just 29,000, and the market rallied. Bad news is good news again.
Friday's September jobs report showed nonfarm payrolls rose 29,000, well below the 90,000 economists polled by Reuters expected. The unemployment rate ticked up to 4.2%, against forecasts for it to hold at 4.1%. July was revised to a loss of 10,000 jobs, and July and August combined came in 60,000 lower than first reported. Average hourly earnings rose just 0.1% on the month and 3.0% on the year. The labour market isn't collapsing, but it isn't running hot either. That's what the bond market needed to hear.
FedWatch odds of an October rate hike fell to 22.7% on Friday, from 64.2% a week earlier. "Today's news was OK insofar as it means the economy isn't roaring," said Robert Bernstone of SummitTX Capital. "Yes, it's fine insofar as it takes the short-term rate hike off, but there is a concern over the economy, there is a concern over inflation, so cautious optimism is kind of where people are."
🔁 Market Movers
📉 September Scorecard: Dow -4.3%, Financials -6.3%
September was the worst month of 2026 for the Dow, which fell 4.3% — dragged lower by financials (-6.3%), industrials, and consumer discretionary. The S&P 500 lost 0.5%. The Nasdaq rose 2.4%, thanks to AI and semiconductor names. September lived up to its historical reputation as the market's worst month — the seasonal pattern held in a year when almost nothing else has followed the script.
📊 August PCE Below Expectations — October Hike Bets Pare Back
Wednesday's PCE data showed the Fed's preferred inflation gauge cooling more than expected in August, sending tech stocks surging intraday. The report pared back October rate hike odds and provided the first tangible evidence that the inflation pressure driving the Fed's September hike may be fading. Tech rallied on the data, even as the broader index reversed lower by the close.
📈 Q4 Opens with a Rally — Nvidia Leads Nasdaq to Intraday Record
After a bruising end to Q3, the first two sessions of Q4 brought relief. Yields retreated from their peaks on Thursday and Friday. Soft September employment data on Friday reinforced the "bad news is good news" dynamic, and Nvidia $NVDA ( ▲ 1.34% ) led the Nasdaq to an intraday record. Small caps outperformed for the first time in weeks.
😟 Consumer Confidence Falls to 12-Year Low
Consumer confidence plunged to its lowest level since 2014, with respondents citing elevated gas prices, tariff uncertainty, and fears about the economy's direction. Combined with consumer sentiment at 48.1 from the prior week, the consumer-facing data is painting a picture of genuine stress — even as corporate earnings remain historically strong.
👀 Signals I'm Watching
📊 Q3 in Review: +2% S&P 500, +2.5% Nasdaq — Despite Everything
The third quarter produced positive returns despite a rate hike, yields surging above 5%, Trump declaring the ceasefire "over," oil re-spiking above $100, and consumer sentiment hitting record lows. The S&P 500's 2% Q3 gain and 12.80% year-to-date advance tell you that corporate earnings — particularly from AI — have been powerful enough to absorb macro shocks that would have caused a recession scare in any prior cycle.
📉 Breadth Is the Biggest Risk Heading Into Q4
On Wednesday, the NYSE recorded 262 new 52-week lows — even as the S&P 500 traded within 1% of its all-time high. On Monday, the Nasdaq posted 461 new lows versus 50 new highs. This kind of breadth divergence — where the index holds up while the majority of stocks decline — is the single most reliable warning signal that a broader correction may be approaching. It doesn't guarantee one, but it demands respect.
🛢 The PCE Data Is the First Real Crack in the Hike Thesis
August PCE coming in below expectations is significant because it's the first major inflation reading to cool since the September rate hike. If September's CPI (due October 10) and October's PCE confirm the trend, the October rate hike that markets were pricing at 55% odds could be taken off the table. Oil remains the swing factor — if it stays near $95–$100, inflation won't cool fast enough.
🗳 Midterms in November — Political Risk Enters the Equation
Trump's diesel export ban floated at the UN, his rejection of the Iran proposal, and rising political pressure on gas prices all point to a market that will increasingly be shaped by midterm election dynamics in the coming weeks. Energy policy, tariff rhetoric, and Iran negotiations will all be filtered through a political lens until November 3.
Personal Portfolio Vs. The Nasdaq (IG story, October 3, 2026)
September is historically the worst month of the year for markets. My portfolio had a different view — up 15.9% against the market's 3.7% gain.
$VICR surged 71%. $FPS added 37%. $BE rose 32%. Investment Club members were in all three early — with the full thesis, sizing, and price targets before the moves happened.
The next names are already being researched. If you'd like to be in the room when we share them, you can become a member here.
George
⚠️ Red Flag to Note
262 New Lows in a Market Near All-Time Highs
This is the number that should concern every investor heading into Q4. On the last day of Q3, the NYSE recorded 262 new 52-week lows despite the S&P 500 sitting within 1% of its record. On Monday, the Nasdaq posted 461 new lows. These aren't small-cap obscurities — they span consumer discretionary, financials, industrials, real estate, and transports. Six sectors have been in multi-week downtrends. Financials just posted their worst month since March 2023.
The S&P 500 at 7,723 is not a broad market rally. It's a narrow one, held up by a shrinking number of AI and semiconductor names while the rest of the market deteriorates. In 2018, a similar breadth divergence preceded a 20% correction. In 2000, it preceded a 50% bear market. The AI earnings are real in a way the dot-com stories weren't — but the structural fragility of a market this narrow and yields this high is a setup that has historically resolved to the downside. Q3 earnings season, which begins next week, will determine whether the earnings can broaden fast enough to repair the breadth damage before it matters.
🔍 Insider Transactions I’m Watching
Ticker | Insider | Action | Value | Why It Matters |
|---|---|---|---|---|
Joey Agree — President & CEO | Buy | ~$1.5M (2 purchases) | The Agree Realty CEO purchased 20,655 shares across two open-market buys in late September at roughly $73 each. The net-lease REIT sector has been under severe pressure from rising rates — real estate is down five consecutive weeks. A REIT CEO buying $1.5M into his own company while the 10-year sits above 5% and real estate is the worst-performing sector is a direct bet that yields have peaked. | |
William P. Scully — Director | Buy | ~$843K | The Prothena director purchased 100,000 shares at $8.43 on September 18. Prothena insiders have made 10 purchases and just 2 sales over the past six months — an 5:1 buy-to-sell ratio in a biotech focused on neuroscience and amyloidosis. Director buying in beaten-down biotech while healthcare is one of the few sectors still outperforming is a bet on pipeline catalysts overriding the macro noise. | |
Stephen H. Rusckowski — Director | Buy | ~$3.48M | The Oracle director purchased 25,000 shares at roughly $139 on September 29. Oracle announced a $20B equity and debt raise for AI infrastructure in July and the stock fell 8% on the dilution. A director deploying $3.5M into Oracle while the market questions whether AI capex can generate returns is a direct bet that the buildout pays off. |
📬 Closing Note
September was the month the market finally felt the weight of everything that's been building since March. The first rate hike in three years. The 10-year above 5%. Oil back near $100. Consumer confidence at a 12-year low. The Dow's worst month of 2026. And market breadth so poor that 262 stocks hit new 52-week lows on the same day the S&P 500 sat within 1% of its record.
And yet — the S&P 500 is still up 13% year to date. Corporate earnings grew 25%+ in Q2. Nvidia led the Nasdaq to an intraday record on the first Friday of Q4. And PCE inflation came in below expectations, offering the first tangible evidence that the inflation pressure driving the Fed may be fading.
This is the tension that will define Q4: an economy that's slowing, a Fed that's hiking, yields that are testing crisis-era levels, and a stock market that refuses to break — because AI-driven earnings are strong enough to carry the index even when everything else weakens.
Q3 earnings season begins next week. It will answer the question the market has been asking all year: can corporate profits grow fast enough to justify these valuations in a 5% yield world?
Stay patient. Stay selective. And let the data guide the story.
Until next Sunday —
