Friday 9/25/2026 a.m.

• Stocks trade higher to close out the week – U.S. equity markets are trading higher on Friday, supported by stable Treasury yields, lower oil prices, and another sign of resilient economic momentum. Headline durable goods orders were unchanged in August. However, core capital goods orders, which exclude defense spending and aircraft, rose a healthy 1.6% on the month, signaling solid underlying business investment trends, in our view. On the geopolitical front, Iran has reportedly proposed a seven-day plan to reopen the Strait of Hormuz and restart negotiations if the U.S. accepts certain conditions. While the U.S. is still reportedly evaluating Iran's proposal, the prospect of renewed negotiations is likely contributing to this morning’s decline in oil prices. Lower oil prices are also providing some relief to Treasury markets. The 10-year Treasury yield is modestly lower to begin the day at 5.19%, while the 2-year yield has declined to around 4.9%.
   
• Historical performance following a sharp rise in interest rates – Despite reprieve on Friday, bond yields have moved sharply higher in recent weeks. The 10-year Treasury yield has risen more than 0.4 percentage points in September, reaching its highest level since 2007, while the 2-year yield has increased by more than 0.5 percentage points. Since 1990, there have been only 16 months (including September) in which the 2-year Treasury yield rose by 0.5 percentage points or more.* Historically, equity returns following these episodes have been mixed. The S&P 500 has fallen by 2% on average over the subsequent three months with a median return of -0.5%.* Performance over longer horizons was also muted, with average six- and 12-month returns of -5.8% and 0.5%, respectively.* However, historically, the economic backdrop appears to be an important differentiator. When excluding the two periods in which nonfarm payrolls declined over the preceding three months (March 2002 & April 2008), forward returns were considerably stronger.* When payroll growth was positive, the S&P 500 generated an average three-month gain of 0.4%, while average returns over the subsequent six and 12 months improved to 1% and 9.5%, respectively.* Current conditions more closely resemble this more favorable subset, with nonfarm payrolls increasing by 214,000 over the past three months. Recent data also suggest that higher interest rates have not materially disrupted economic activity or corporate profit growth, in our view. Therefore, while continued bond-market volatility may contribute to periods of volatility in stocks, we believe the longer-term backdrop for stocks remains supportive.
   
• Business investment remained resilient in August – This morning’s durable goods report provided another indication of healthy economic momentum in the U.S. Headline orders were unchanged in August, but core capital goods orders, which exclude the more volatile aircraft and defense categories and serve as a useful leading indicator of business investment, rose a solid 1.6% on the month and 14.9% from a year ago. Investment related to the buildout of artificial intelligence infrastructure has been a notable source of strength, with orders for computers and related products rising more than 17% from August 2025. Despite elevated oil prices and higher borrowing costs, economic activity and corporate profit growth have remained resilient. We believe these factors should continue to provide important support for equity markets through year-end.

Brock Weimer, CFA;
Investment Strategy

^{Source for all data not cited: FactSet. 
Source for all data cited: *FactSet, Edward Jones S&P 500 price index. Performance excludes qualifying months that occurred within the same calendar year of another qualifying month to avoid performance overlap. Qualifying months calculated as having a 0.5 percentage point rise or more in the 2-year Treasury yield.}