Higher Yields Test Resilient Markets Ahead of Key Inflation Data
September 8, 2026
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Last week, U.S. equity markets posted modest gains as investors balanced strong corporate earnings and a higher-rate backdrop. The S&P 500 Index remained near record highs after gaining 2.7% in August, while small-cap stocks and international markets continued to participate in the rally.1 The Cboe Volatility Index (VIX) closed at 15.30, up roughly 2.5% on the week, reflecting rising uncertainty ahead of a data-heavy week.2 Leadership remained concentrated in technology, cloud infrastructure, semiconductors and data center beneficiaries, though breadth improved relative to earlier in the year.
The Treasury market remained under pressure as yields rose across the curve. The 10-year yield climbed to 4.78%, and the 30-year reached 5.25%,3 levels not seen since 2007.4 The primary catalyst was Federal Reserve (Fed) Chair Kevin Warsh's Aug. 28 Jackson Hole address, in which he warned that inflation is not meaningfully slowing and reaffirmed the Fed's 2% target as "firm and fixed."5 Notably, the largest single-day moves in the front end of the Treasury yield curve since Warsh became chairman in May have all followed his public appearances.6 Following the speech, traders priced a rate hike as more likely than not at the September Federal Open Market Committee (FOMC) meeting.7 Fed Governor Waller offered a more measured tone, signaling a lean toward holding if August inflation data — due this week — shows continued progress.
Corporate credit markets continued to demonstrate resilience despite the higher-rate environment. Investment-grade option-adjusted spread (OAS) stands at approximately 80 basis points (bps), near multi-decade lows, while high-yield OAS is approximately 266 bps, reflecting sustained demand for spread product.8 Healthy corporate balance sheets and solid earnings results have helped offset concerns regarding higher borrowing costs and tighter monetary policy, supporting continued issuance activity across both investment-grade and high-yield markets. September investment-grade issuance may set yet another monthly record.
On the macro front, the labor market remains the picture of a soft landing in progress. August nonfarm payrolls rose by 162,000, the unemployment rate held at 4.1% and weekly jobless claims came in at 206,000 — collectively reinforcing the view that the labor market is slowing but stable.9,10 Inflation, however, remains the dominant concern. July Consumer Price Index (CPI) printed at 3.4% year over year (YoY) and July Producer Price Index (PPI) at 4.7% YoY, both well above the Fed's 2% target.11,12 Energy prices compounded the inflation narrative: West Texas Intermediate (WTI) crude sits above $93 per barrel this morning and Brent over $98 per barrel, driven by renewed conflict involving Iran and concerns over shipping disruptions through the Strait of Hormuz.13
The week ahead is dense with potential market-moving catalysts. August CPI and PPI releases are the primary focus — Fed Governor Waller has explicitly flagged these prints as pivotal to the September rate decision — and Treasury market volatility is expected to remain elevated given ongoing fiscal supply concerns and FOMC positioning.14 On the earnings front, Oracle and Adobe report after the close on Thursday and will be closely watched for commentary on artificial intelligence capital expenditure trends and enterprise software demand.15 Meanwhile, developments in the Middle East remain a key wildcard for energy prices and broader inflation expectations heading into the September FOMC decision.
Sources:
1,4Moore Invested – Market Update – August 2026; 9/3/26
2,6,8,15Bloomberg
3CNBC – 10-year U.S. Treasury yield hits highest level since November 2023; 9/2/26
5,7CNBC – Fed Chairman Warsh expresses concern about inflation, advocates for ‘quieter’ central bank; 8/28/26
9Bureau of Labor Statistics – The Employment Situation – August 2026; 9/4/26
10Bureau of Labor Statistics – Employment Insurance Weekly Claims; 9/3/26
11U.S. Bureau of Labor Statistics – Consumer Price Index News Release; 8/12/26
12U.S. Bureau of Labor Statistics – Producer Price Index News Release; 8/13/26
13Yahoo! Finance – Oil prices approach $100 as Middle East conflict flares, Goldman sees potential upside to $120; 9/8/26
14MarketWatch – Economic Calendar; as of September 8, 2026
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