Market snapshot: US hiring, FTSE 100 misfiring

Markets ended the third quarter on a mixed note following economic updates which further clouded the US economic picture.

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

The Personal Consumption Expenditures index (PCE), the Federal Reserve’s preferred inflation gauge, increased in August by an annualised 3.4%, as compared to the expected 3.7%. Core PCE, which excludes the more volatile food and energy components, was expected to rise by 3.3% but came in at 3%, although both figures are well above the Fed target.

However, due to the fact that the data was historic and that some methodology changes in calculating the numbers were introduced, the release did little to change the underlying inflation narrative.

In addition, there are increasing signs that the US economy is much stronger than many had anticipated. GDP for the second quarter increased by 2.2% annualised, revised up from a previous 1.5% estimate, driven by robust consumer spending and business investment related to the AI infrastructure buildout.

• M&G and Aviva among dozen FTSE 100 dividend payers in October
• Stockwatch: I’d still buy this share despite looming board battle

Employment numbers from ADP added a completely new angle to the job openings report the previous day, which had apparently confirmed the “low hire, low fire” environment. However, those figures related to August whereas for September, on which the ADP report was based, it was revealed that 90,000 private sector jobs had been added, as compared to a consensus of 68,000 and a downwardly revised 36,000 August number.

This could imply that the employment weakness seen in August was overturned last month, with the most highly regarded of labour releases, the non-farm payrolls report, likely to complete the picture tomorrow. The current estimate is that around 85,000 jobs will have been added in September, as compared to 162,000 the previous month, with the 4.1% unemployment rate unchanged.

As such, the release takes on added significance as to whether another rate hike could be on the cards later this month. While the chances of an increase have reduced to 37%, the bond market is signalling that further rises are nonetheless on the way. Treasury yields remain elevated and were largely unimpressed by yesterday’s economic updates. Some relative weakness in the oil price, currently standing at around $98 per barre, would add to the conclusion that interest rate hikes are coming, but the need is less pressing than originally believed.

• Can GSK shares outperform FTSE 100 index over the long run?
• FTSE 100 ex-dividend dates: October 2026

Oil prices have moved down over recent days on suggestions that exports from the Middle East are nearing pre-conflict levels as the US and its allies become more adept at fending off Iranian attacks in the Strait of Hormuz.

The many moving pieces have led to mixed performances for the main indices, although each remain ahead for the year. The Dow Jones lost 4.3% in September and 2.7% for the third quarter, but is ahead by 5.9% in the year to date. The benchmark S&P500 fell 0.5%, but added 2% in Q3 and is 11.8% higher for the year, while the Nasdaq has been the outlier given its tech focus, with rises of 1.9% in September, 2.5% in Q3 and 15.6% so far this year.

The FTSE100 slumped at the opening of the final quarter of 2026, driven by a markdown which excluded all but a handful of stocks and led to a more than 1.5% decline. Tech related investor Polar Capital Technology Ord (LSE:PCT) was a rare exception, alongside some strength from gold price-driven Endeavour Mining (LSE:EDV) and Fresnillo (LSE:FRES), but elsewhere the sea of red swallowed most sectors.

• eyeQ: a much better way to play a property boom
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

British American Tobacco (LSE:BATS) was lower by more than 3% as a new tax on vapes in the UK came into effect, while oil stocks followed the previous day’s declines of the underlying commodity and there was general weakness among the retailers and financials. The decline leaves the primary index ahead by 5.1% so far this year, but moving further from the February record high, which is now some 4.5% away.

The moves eclipsed relatively unnoticed changes to the constituents outside of the usual quarterly reshuffle. Due to their recent acquisitions, both Schroders (LSE:SDR) and Beazley (LSE:BEZ) are now delisted and will be replaced by Balfour Beatty (LSE:BBY) and WPP (LSE:WPP). For Balfour Beatty this is a long-awaited return, with the group last at the top table in 2009, whereas WPP is back after its relegation in December 2025.