Weekly Outlook: “Once returns reach 5 percent, it gets tougher for stocks”

Technology stocks have outperformed the broader market significantly over the past week. At the same time, high yields are weighing on valuations. Ahead of the start of the Q3 earnings season, corporate earnings trends are taking on added importance.

September 28, 2026. FRANKFURT (Deutsche Börse). The stock markets showed a generally positive trend last week, though there were clear regional differences.

The DAX (DE0008469008) and the Stoxx Europe 600 (EU0009658202) rose only moderately, by 0.4 percent and 0.5 percent, respectively.

In the U.S., by contrast, the S&P 500 (US78378X1072) rose 1.2 percent, while the Nasdaq 100 (US6311011026) gained as much as 3.3 percent. At the start of the new week, the DAX is trading at around 25,450 points, a level similar to that seen on Friday evening.

AI Sentiment Shifts Again

The renewed shift in sentiment toward artificial intelligence contributed to the significant outperformance of technology stocks. Initially, security warnings from the industry had weighed heavily on chip stocks in particular. However, new AI products from Meta Platforms, Facebook’s parent company, subsequently sparked a significant rebound. In this context, Frank Klumpp of LBBW points to the strong response to Meta’s AI agent, Muse. The app has been downloaded more than two million times since early September. Meta subsequently announced Muse Charm, a complementary hardware product.

Jens Herdack of Weberbank believes the operational foundation of the AI trend remains intact despite the security debate. In his view, investments in data centers that are already planned are supporting demand in the supplier industry. At the same time, he expects security issues to be discussed more frequently in the coming weeks, meaning volatility will remain high.

High Yields as a Headwind

At the same time, high energy prices, inflation concerns, and rising interest rate expectations continued to weigh on the stock markets. As a result, strong economic data is not currently being viewed as entirely positive. LBBW points out that, in an environment where yields are already high, rising yields have historically been more often accompanied by falling stock prices. Klumpp cites worse financing conditions, more persistent inflation risks, and growing competition from bonds as reasons for this.

A look at previous periods of interest rate hikes also reveals a mixed picture. In all seven phases examined by LBBW over the past 40 years, the S&P 500 rose over the course of the entire cycle. In the first few months after the start of a rate-hiking cycle, however, stocks typically underperformed. According to LBBW’s historical analysis, rising yields on 10-year U.S. Treasury bonds above the 5 percent mark were generally accompanied by falling stock prices.

Earnings Provide a Counterbalance

On the corporate side, rising interest rate pressure is offset by strong earnings growth. Andreas Hürkamp of Commerzbank notes that the third-quarter earnings season will pick up steam in the second week of October. Analysts currently expect S&P 500 companies to report a 25 percent year-over-year increase in earnings for the third quarter. Expectations for the full year 2026 have also been raised significantly since the beginning of the year. According to Commerzbank, the expected earnings growth for the S&P 500 has risen from 15.6 to 33.6 percent since January. This is well above the corresponding expectations for the Euro Stoxx 50 and the DAX.

Seasonally Strong Final Quarter

This week, however, marks the start of the fourth quarter. Against this backdrop, Jörg Scherer of HSBC points to the historical seasonality of the DAX. Since 1988, the index has gained an average of 6.49 percent in the final quarter. According to this data, only four of the past 35 final quarters ended with losses. If the DAX was already trading in positive territory at the end of September, the historical average rose to 8.4 percent, with a success rate of 95 percent. Since the beginning of the year, the index is currently up just under 4 percent.

Key Economic and Business Events of the Week

Monday, September 28

4:00 p.m. Eurozone: ECB President Christine Lagarde at the European Parliament. The monetary policy dialogue with the Committee on Economic and Monetary Affairs in Brussels will focus on the quarterly assessment of the ECB’s monetary policy.

Tuesday, September 29

11:00 a.m. Eurozone: Business confidence. The consensus forecast expects an increase from 98.4 to 98.8 points. Deka economists see this as another sign of economic recovery, but point to the strain on households caused by higher inflation and on the construction sector caused by rising interest rates.

4:00 p.m. U.S.: Consumer confidence. Analysts expect a slight increase from the previous reading of 89.4 points to just over 90 points.

Wednesday, September 30

2:00 p.m. Germany: Consumer prices. Helaba forecasts a 0.6 percent increase in prices compared with the previous month and an annual rate of 3.2 percent. Higher fuel prices would thus be the main driver; for the first time since the end of 2023, inflation would rise above 3.0 percent.

2:30 p.m. U.S.: Personal Consumption Expenditures Price Index, excluding energy and food. Commerzbank analysts expect a 0.2 percent increase from the previous month, while the consensus forecast is 0.3 percent. A moderate increase would somewhat dampen the recently rising expectations of further interest rate hikes by the Federal Reserve.

5:45 p.m. Eurozone: Speech by ECB Executive Board member Isabel Schnabel.

Thursday, October 1

3:30 p.m. Eurozone: Speech by ECB President Christine Lagarde. Lagarde will open the annual conference of the European Systemic Risk Board in Frankfurt.

4:00 p.m. U.S.: Manufacturing Purchasing Managers’ Index (PMI). The consensus forecast is 55.0 points, up from 54.6 points. Deka remains below this at 54.5 points, citing somewhat weaker regional surveys. Commerzbank, on the other hand, expects 55.5 points.

Friday, October 2

11:00 a.m. Eurozone: Inflation data. The consensus forecast calls for the inflation rate to rise from 3.2 to 3.6 percent and the core rate from 2.4 to 2.5 percent. Helaba’s projections—3.8 and 2.7 percent, respectively—are higher, citing rising energy prices as the main reason.

2:30 p.m. U.S.: Labor market data. About 100,000 new nonfarm jobs are expected. LBBW forecasts only 40,000. Analysts also expect the unemployment rate to be 4.1 percent instead of the consensus estimate of 4.2 percent; hourly wages are expected to rise by 0.3 percent from the previous month.