The market awaits new clues on policy direction! The Federal Reserve's September meeting minutes become a key test this week. PepsiCo and Delta Air Lines financial reports are released first.

According to Zhitong Finance APP, last week, both the Dow Jones Industrial Average and the S&P 500 Index closed lower, down 1.3% and 0.3% respectively; the Nasdaq Composite rose by 0.5% and hit an all-time intraday high last Friday.

Although artificial intelligence (AI) trades are supporting index-level market performance and weaker-than-expected key inflation data, coupled with some dovish remarks from officials, have significantly cooled expectations for further interest rate hikes by the Federal Reserve this month, U.S. Treasury yields continue to climb—last week, the 30-year Treasury yield briefly reached 5.69%, and the 10-year yield broke above 5.3%, both marking the first time since 2002 that these levels have been reached—at the same time, persistent tensions in the Middle East and sustained high oil prices remain major challenges for investors.

In the upcoming week, the Federal Reserve's policy path will remain at the core of market trading focus. The minutes of the September Federal Open Market Committee (FOMC) meeting, to be released on Wednesday, will provide investors with more clues to judge whether the Fed will raise rates again in October.

At the September 16 meeting, all FOMC members unanimously voted to raise rates by 25 basis points, setting the target range for the federal funds rate at 3.75%-4.00%. The latest economic forecasts show FOMC members project a federal funds rate median of 4.1% by the end of 2026, slightly higher than the current median policy range, which means there is still room for further rate hikes this year under the updated forecast framework.

On the macro data front, this week’s releases—including the U.S. September ISM Services Index, August trade balance, consumer credit, initial jobless claims, and the preliminary University of Michigan consumer sentiment index for October—will provide the latest basis for judging the state of the U.S. economy.

On the corporate side, the third quarter earnings season is coming. Although the latest round of earnings season has not fully kicked off this week, a number of key companies in the consumer and airline sectors will release their results first. Constellation Brands (STZ.US), Levi Strauss (LEVI.US), PepsiCo (PEP.US), and Delta Air Lines (DAL.US) will successively report, providing new windows to observe the demand for U.S. alcoholic beverages, apparel, food and beverages, and air travel. The real start of earnings season will be next week, when large banks such as JPMorgan Chase (JPM.US) and Bank of America (BAC.US) release their results, which is traditionally seen as the official kick-off for the new earnings season.

According to a FactSet analysis at the end of September, as Q3 progressed, analysts have become increasingly optimistic on earnings and have raised S&P 500 constituent companies’ earnings per share expectations by 1.3%. Normally, analyst earnings expectations are revised downward as the quarter progresses.

FactSet data shows analysts expect S&P 500 companies’ Q3 revenue to increase by 12.1% year-on-year, with profits up by 29.1%. FactSet states that if these expectations are met, S&P 500 constituent companies will see profit growth exceed 25% for three consecutive quarters.

Wolfe Research stated that the upward revision of expectations suggests that corporate profits may “continue to maintain momentum.” Analysts at the firm wrote last week: “Although another consecutive quarter of strong earnings expectations raises the bar for companies reporting in the coming weeks, we continue to believe that AI infrastructure building remains strong, and in the context of macroeconomic volatility, this round of earnings season is likely to become a positive catalyst for the stock market.”

FOMC September Meeting Minutes to Be Released Soon

The Federal Reserve will release the minutes of the FOMC meeting held September 15-16 on Wednesday Eastern time. This is expected to be the most important macroeconomic event of the week. At the September meeting, the Fed decided to raise rates by 25 basis points and noted in its policy statement that U.S. economic activity continues to expand at a solid pace, domestic spending remains resilient, capital investment is strong, employment growth is broadly matching labor supply, but inflation remains elevated.

Compared to the policy statement, the meeting minutes will provide more details on internal discussions. The market will focus on three key questions: how officials assess the sustained impact of rising energy and other costs on inflation; whether more committee members believe the current rate level is still insufficient to curb price pressures; and what economic data would trigger another rate hike.

The September economic forecast shows a median FOMC projection for the PCE inflation rate at 3.7% and core PCE at 3.4% by the end of 2026, while the federal funds rate median is 4.1%. Therefore, if the minutes show most officials still regard inflation as the primary risk, the market could continue to bet on a rate hike by the Fed in October or December; conversely, if officials' concerns about employment and economic growth intensify, expectations for further rate hikes might be constrained.

U.S. September ISM Services Index to Be Released: Price and Employment Sub-Indices Worth Watching

On Monday, the Institute for Supply Management (ISM) will release the September ISM Services PMI. Data show that in August, the ISM Services PMI was 55.4, up from 54.1 in July, and remained in expansion territory above 50 for the 26th straight month. The business activity index rose to 61.7, and the new orders index climbed to 60.9, indicating strong demand in the services sector.

However, two sub-indices in the report warrant special attention. The August services employment index was only 47.8, shrinking for the second consecutive month; meanwhile, the prices paid index surged to 72.6, the highest since August 2022.

This indicates that the U.S. services sector currently exhibits a combination of “strong demand, weak employment, and high price pressures.” Therefore, if the September data continue to show a prices index above 70, alongside another improvement in the employment sub-index, it could reinforce the view that the economy remains resilient and inflationary pressures persist, thereby supporting the market’s expectation of further Fed rate hikes.

PepsiCo Earnings to Test Food and Beverage Consumption in the U.S., North American Performance is Key

Before the U.S. market opens on Thursday, PepsiCo will announce its financial results for the third quarter of fiscal year 2026. In the second quarter, the company achieved net revenue of $24.181 billion, an increase of 6.4% year-over-year; organic revenue grew 2.4%, and core EPS rose 4% year-over-year. The company also maintained its full-year fiscal 2026 guidance.

In the third quarter, the market will closely watch trends in PepsiCo’s North America food and beverage business volume, pricing power, and profit margins. Although the company previously performed relatively well internationally, North American consumers are more sensitive to food and beverage prices, making the outlook for U.S. sales a key to this report.

In addition, investors will focus on whether previous initiatives—such as portfolio adjustments, sugar-free drinks, functional foods, and cost-cutting measures—can drive growth in the North American business. If both volume and organic revenue rise further, it would indicate U.S. consumers are adapting to price changes in food and beverages.

Delta Air Lines Earnings in Focus: Air Travel Demand and High Oil Prices Under the Spotlight

On Friday, Delta Air Lines will release its third-quarter financial results for fiscal year 2026. The company’s Q2 earnings exceeded previous guidance and it expects Q3 revenue to grow year-over-year by more than 10%, while reiterating full-year adjusted EPS of $6.50-7.50 and free cash flow of $3-4 billion. For this earnings report, the market will closely monitor domestic and international route demand, revenues from corporate and premium passengers, ticket prices, and unit costs.

At the same time, with global oil prices remaining high recently, jet fuel costs have re-emerged as a key variable. Investors will watch to see if higher oil prices significantly erode Q3 profit margins and whether the company can mitigate fuel price volatility through ticket pricing, capacity adjustments, and its refinery business.

If travel demand remains strong and the company maintains its full-year profit guidance, it would show that U.S. consumer spending in services remains resilient. However, if fuel costs rise sharply or booking demand weakens, airline industry earnings expectations may need to be revised accordingly.