Week #36 — Market Update for September 1-4, 2026

Executive Summary

U.S. equities finished the shortened week higher. The move was modest, but the composition mattered. The Russell 2000 proxy rose 0.7%, ahead of the S&P 500 at 0.4% and Nasdaq 100 at 0.3%. This was a better breadth signal than another week of mega-cap leadership.

The week still had a sharp reversal inside it. Stocks sold off on Tuesday as oil and yields rose, then recovered on Wednesday and Thursday. Friday's payroll number reversed that recovery at the margin. The S&P 500 fell 0.38% on Friday, yet remained positive for the week.

Broadcom supplied the cleanest company-level signal. Q3 revenue grew 86% year over year to $29.6 billion, while AI semiconductor revenue reached $16.7 billion, up 221%. The stock fell after management's fourth-quarter revenue outlook of $34.8 billion came in just below consensus. Demand is strong. The market now wants delivery against a very high bar.

Global equities were stronger than the United States. ACWX, used here as a global ex-U.S. proxy, gained 1.4%. That supports the breadth argument, but it does not remove the rates problem. Higher sovereign yields are now a global constraint, not just a U.S. one.

Bitcoin gained 1.4% from Monday close to Friday close. Ether slipped 0.4%. Crypto traded more like a high-beta liquidity asset than a clean inflation hedge as real yields rose and the dollar weakened slightly.

The key data point was the August employment report. Payrolls increased 162,000, unemployment held at 4.1%, and July payrolls were revised from -23,000 to +21,000. The labor market is not collapsing. That gives the Federal Reserve room to focus on inflation rather than rescue growth.

The setup for investors is simple: current earnings can absorb a higher discount rate, but long-duration assets and weak balance sheets cannot. Next week's inflation data decides whether Friday's bond move becomes a trend.

US Stock Market

U.S. stocks held up because the economy still produces earnings. That is the important distinction. The market did not need falling yields to rise, but it did need investors to believe that higher yields would not damage profit estimates.

The weekly returns were SPY +0.4%, QQQ +0.3%, DIA +0.5%, and IWM +0.7%. The small-cap lead was limited, but useful. A rally that includes smaller companies has better internal health than one driven by only the largest technology names.

Broadcom made the AI trade more selective. Its Q3 result was excellent: $29.6 billion of revenue, $3.32 adjusted EPS, and $13.7 billion of free cash flow. AI semiconductor revenue grew 221% year over year. Yet the stock sold off because Q4 revenue guidance was $34.8 billion versus $35.0 billion expected. This is what a mature AI trade looks like. The business can execute and still disappoint the price.

The edge in AI infrastructure remains physical demand. Hyperscalers continue buying custom accelerators and networking because deployed workloads generate revenue. The risk is multiple compression when growth is merely excellent instead of extraordinary. Own the cash flow, not the story alone.

Global Markets

Global ex-U.S. equities outperformed the U.S. proxy by roughly one percentage point. That is a meaningful weekly difference, but too short a sample to call a leadership change. The better conclusion is that capital is still willing to buy exposure outside the crowded U.S. growth complex.

The constraint is the same everywhere: government borrowing costs are rising. Reuters described a bond selloff spanning Tokyo, Sydney, London, and New York. That raises the hurdle for equities across regions, even when local earnings are stable.

Global breadth is investable only if currencies and rates stop working against it. For now, keep the signal modest. The price action says diversify. The bond market says do it carefully.

Cryptocurrency Market

Bitcoin rose 1.4% from the 31 August close to the 4 September close, while ether fell 0.4%. The gap is small, but it fits the week's macro pattern: bitcoin retained demand while ether failed to keep pace as yields moved higher.

Crypto's structural edge is liquidity and scarcity. That can work when financial conditions ease or when investors seek an asset outside sovereign balance sheets. It is less useful when the market is repricing the cost of money. This week was a reminder that crypto does not get a free pass from rates.

Economic Indicators, Statistics and News

United States: employment was firm, inflation is next

The Bureau of Labor Statistics reported 162,000 payroll gains in August and a 4.1% unemployment rate. July was revised up to a 21,000 gain. Food services and local-government education added jobs; the information industry lost jobs. Labor demand is slower than the early-cycle boom, but it is not weak enough to force the Fed's hand.

That matters because Fed Governor Christopher Waller said on 3 September that he would support holding rates if incoming inflation data continued to improve, but would consider a hike if August inflation reversed that progress. His reaction function is unusually clear. The next CPI and PPI reports are not background data. They are the decision.

Manufacturing: expansion with inventory support

S&P Global's August U.S. Manufacturing PMI was unchanged at 53.9. Output rose for the fifteenth straight month, but output and new-order growth slowed. S&P also reported that stock building and supply concerns were supporting activity. That is a mixed signal: the sector is expanding, but part of the strength may be inventory timing rather than final demand.

Foreign Exchange Markets

The dollar index proxy fell 0.3% for the week to 99.16. It weakened even as U.S. two-year yields rose, which suggests the FX market is balancing higher U.S. rates against broader concerns about fiscal and geopolitical risk. Friday's jobs report lifted the dollar first, but much of that gain faded by the close.

A softer dollar helps global equities and commodities. It does not cancel the tightening effect of higher yields. For positioning, the combination is better for exporters and hard assets than for long-duration domestic growth.

Commodities and Energy Markets

Oil was the week's loudest move. The USO proxy rose 6.2%, while the gold proxy fell 0.4% and the copper proxy slipped 0.1%. Rising oil is a tax on consumers and a direct input into inflation expectations. That is why it mattered more than the small equity gain.

Gold's inability to rise with oil and a softer dollar was a useful warning. The market was not buying every inflation hedge. It was pricing a more specific energy shock alongside tighter policy. Copper was flat, which also argues against reading the oil move as proof of a broad industrial acceleration.

Debt and Fixed Income Markets

Bonds delivered the clearest risk signal. On Friday, the two-year Treasury yield rose more than four basis points to 4.377%, the highest since January 2025. The 10-year reached 4.812% intraday and was around 4.784% later. The 30-year was near 5.245%.

The front end moved because the jobs report raised the chance of a September hike. The long end is more complicated. It reflects inflation risk, energy prices, fiscal supply, and the market's required return for owning duration. Together, they raise the discount rate applied to every asset with cash flows far in the future.

TLT fell 0.4% for the week. This is why the equity gain deserves respect but not complacency. Stocks are holding because earnings are current. Long bonds are telling us that the cost of capital is still moving against them.

What to Watch Next Week

Next week's trade is inflation versus the labor-market surprise. The calendar includes U.S. PPI on 10 September and CPI on 11 September. The European Central Bank also meets on 10 September. Both U.S. inflation prints arrive before the 15-16 September FOMC meeting.

• CPI and PPI: a soft core reading would validate the Waller hold case. A hot reading would make Friday's yield move the start of a repricing rather than a one-day reaction.
• Oil: another leg higher would feed directly into inflation expectations and squeeze consumer-sensitive sectors.
• Breadth: watch whether IWM and global equities continue to outperform. If they do, the rally has healthier internals. If they reverse while yields rise, reduce exposure to weaker balance sheets.
• AI earnings expectations: Broadcom showed that exceptional growth is now the baseline. Future upside needs either higher estimates or a lower multiple hurdle.