CWS Market Review – September 22, 2026

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The stock market has been in a relatively buoyant mood this week. The S&P 500 narrowly missed closing higher for four days in a row. In fact, Wednesday was the market’s best day in seven weeks, and it’s very close to another all-time high. The current all-time high was set on August 13. Over that time, the market had a brief 3.2% drawdown; and we’ve nearly made it all back.

The Nasdaq has been even more impressive. That index reached an all-time high today. The tech-heavy index reached its previous all-time high in June. If you recall, the Nasdaq had a 10% drawdown during June and July. Once again, we made it all back.

The market has swung sharply in favor of growth stocks. This continues a trend that started in late July. Typically, higher short-term interest rates from the Fed work to punish rate-sensitive and high-duration stocks, and that’s exactly what we’ve seen.

For example, the S&P 500 Utility Index (XLU) just touched a new 52-week low. This is happening at the same time that the S&P 500 Growth Index (SPYG) is at a new 52-week high. It’s not so much the fault of the Federal Reserve, but the market is reacting to the same forces the Fed is facing.

Make no mistake: this is still a market that’s fixated on AI. Advanced Micro Devices (AMD) just became the latest $1 trillion company. There are now 12 stocks in the “Four Comma Club.” Expect to see more.

The folks at FactSet broke down the earnings calls from the most recent earnings season. They found that the term “AI” was referenced in two-thirds of the earnings calls. This was the third quarter in a row that AI has appeared on more than 65% of earnings calls. AI was mentioned on 97% of tech earnings calls.

As you might guess, the AI trade is back. Shares of Meta (META) rallied 11% after its new Muse AI agent became #1 at the App Store. Intel (INTC) jumped about 12%, and several other chip and tech names followed.

The Treasury bond market eased up a bit today. The yield on the 10-year Treasury fell below 5%. The Federal Reserve doesn’t meet again for another five weeks, but traders are already speculating on the Fed’s next move. For now, traders are nearly 50-50 on the idea of the Fed hiking rates in October.

Frankly, we’re also in a bit of a slow patch for economic news. This week, we’ll get reports on new-home sales and jobless claims. Next week will be more newsworthy as we’ll get the GDP report and the September jobs report.

The U.S. unemployment rate has been below 4.5% nearly every month for the past four years. In previous times, that would be considered remarkable. Now, it seems like everyone is nervous and pessimistic. Charlie Bilello points out that the unemployment rate has now been below 5% for 60 months in a row. That’s the longest streak since the 1960s.

In the last 17 years, the U.S. economy has been in one two-month recession, and that was due to Covid. We haven’t seen a recession that started for purely economic reasons since 2008. Despite this, all the polls indicate that Americans are quite pessimistic on our future prospects.

Check out this chart of the S&P 500 Growth Index (blue) versus the S&P 500 Value Index (green).

Except for a sharp reversal in June and July, growth has been beating value. Notice how stable the value line is compared with the frenetic growth line.

This highlights an important truth: there are a lot of companies that are being left out of this rally. The problem with such a narrow rally is that it can easily be reversed. Close to 190 stocks in the S&P 500 are more than 20% off their 52-week highs.

Half the stocks in the S&P 500 Energy Index are more than 10% off their 52-week highs, and several of those are more than 20% off. Texas Pacific Land Corporation (TPL) is down more than 30%.

Q3 Earnings Season Preview

Next week, the third quarter of 2026 comes to an end, and the Q3 earnings season will begin shortly after. The unofficial kickoff for Q3 earnings season will be Tuesday, October 13. That’s when JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C) and Goldman Sachs (GS) are due to report. Usually, the big banks are the first to report. A handful of companies with August fiscal year-ends have already reported (Oracle, Adobe and Lennar).

Expectations for Q3 are quite high. The Q2 earnings season was quite good. There had been some nervousness that expectations may have been too high, but that turned out not to be the case.

The number crunchers at FactSet expect Q3 revenue growth of 11.9%, and earnings growth of 28.7%. If that’s right, then it will mark the third quarter in a row in which earnings growth topped 25%.

Interestingly, estimates have been revised higher since the middle of the year. At last count, positive guidance is outrunning negative guidance, 72 to 42. Typically, the reverse happens. Earnings estimates are pared back until earnings season. That lets companies lower the bar until they can easily jump over it. On Planet Wall Street, it’s all a big expectations game.

One positive aspect is that earnings growth appears to be broader and not just mega-cap tech stocks, even though stock prices aren’t reflecting this. The big winner looks to be the energy sector. Thanks to high prices, earnings are expected to double. Obviously, tech is a big player. Earnings at Nvidia (NVDA) are expected to be up 90%. Micron (MU) is expected to be up triple digits as well. MU is due to report after the close one week from tomorrow.

Wall Street expects decent gains for areas like materials, aerospace and transportation. Consumer staples are expected to be flat. If you take out energy, then overall growth falls to the low 20% range. Take out tech, and it falls even more.

In particular, investors will focus on capex spending by the mega-cap names. On top of that, we have geopolitical risks that could impact the market. Overall, the bar is set high for earnings. Expect to see a lot of “earnings beats,” but we want to hear positive guidance for the rest of 2026.

Also, keep an eye on Costco (COST). The store will release earnings after the close on Thursday. Shares of COST haven’t been that strong recently, which is rare for them. Over the last 16 months, the S&P 500 is up 47% while COST is down 6%. Is it a bargain? I’m not so sure. Even after the downturn, COST trades at 40 times next year’s earnings. On Wall Street, even the best stocks will hit rough patches.

That’s all for now. The new-home sales report is due out on Thursday along with the regular jobless claims report. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on September 22nd, 2026 at 5:05 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.