The Profit Margin: September 14, 2026
Statistic of the Week
The brutal heat wave that impacted Europe this summer has taken a significant toll on French vineyards. Extreme heat and drought damaged vines and reduced grape yields across many of the country’s major wine-producing regions. French wine production is now expected to decline by approximately 6% in 2026, which would make this one of the smallest harvests in the past 30 years. The Champagne region has been particularly hard hit, with production expected to decline by nearly 50% compared with last year.
Global Perspective
For the second time this year, the European Central Bank raised interest rates by 0.25%, bringing its deposit facility rate from 2.25% to 2.50%. The ECB cited continued inflationary pressures stemming from the conflict with Iran, particularly the impact of higher energy prices. Inflation is projected to remain above the ECB’s 2% target for an extended period. In its public comments, the ECB noted that the economic outlook remains “highly uncertain.”
Market Moving Events
Tuesday: Empire State Manufacturing
Wednesday: Retail Sales, Import Prices, FOMC Interest Rate Decision
Thursday: Jobless Claims, Housing Starts, Pending Home Sales
Friday: Industrial Production, Leading Indicators
Commentary
Last week’s jump in oil prices coincided with a sharp rise in Treasury yields, putting pressure on equity markets and pushing all three major averages lower. The DJIA fared the worst, falling 1.57%, while the S&P 500 declined 0.80% and the Nasdaq dipped 0.66%.1 Despite reversing lower on Friday, oil prices jumped approximately 10% for the week, with West Texas Intermediate finishing around $100 per barrel.2 Higher energy prices added to inflation concerns and pushed bond yields higher. The 10-year Treasury yield rose 0.19% on the week to close Friday at 4.97%,3 flirting with the critical 5.00% level.
Inflation concerns were reinforced by August’s PPI and CPI (see chart) reports. CPI inflation rose 0.4% during the month,⁴ with energy prices up 2.1% – up 16.3% year over year.4 Consumers are also feeling the impact at the pump, with gasoline prices rising 30 cents over the past month to end the week at a national average of $4.29 per gallon.5 Against that inflationary backdrop, expectations for Federal Reserve policy shifted considerably. At the start of last week, markets were pricing in a 59% chance of a rate hike at this week’s FOMC meeting. By Friday’s close, those odds had risen to 87%.6 Many analysts believe this week’s meeting will be a critical test of Chair Warsh’s credibility in the eyes of the market.
Energy prices, inflation expectations, fixed income yields, and FOMC policy continue to weigh on investors. Yet corporate earnings remain an important counterbalance. Analysts have now raised S&P 500 earnings expectations for 21 consecutive weeks, providing a key underpinning for equity prices.7
Chart of the Week
The Consumer Price Index showed inflation holding steady at an annual rate of 3.4%, in line with analyst expectations. Core inflation, which excludes the more volatile food and energy categories, increased slightly more than expected.
Source Materials
Market Moving Events:
MarketWatch.com
Chart of the Week:
Clearnomics,
Bureau of Labor Statistics
Statistic of the Week:
The Economist
Global Perspective:
The Economist
Commentary:
1. Bloomberg
2. Barron’s
3. MarketWatch.com
4. Bureau of Labor Statistics, Investor’s Business Daily
5. MarketWatch.com
6. Barron’s
7. Barron’s
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