Markets experienced a volatile week, shaped by the Federal Reserve’s rate hike, swings in oil prices and sharp moves in artificial intelligence-related stocks. Yet major indexes quickly recovered part of their losses. Despite inflation remaining elevated, the U.S. economy continues to show resilience. This week, we also take a closer look at Lumentum Holdings, a company directly exposed to accelerating investment in AI infrastructure.
In Focus
Lumentum Holdings (LITE)
Lumentum Holdings operates at the heart of a segment that has become essential to the development of artificial intelligence: optical connectivity. Its lasers, modules and photonic systems enable massive amounts of data to move quickly between the processors and servers that make up modern data centres.
Demand is growing rapidly. For the quarter ended in June, Lumentum generated US$1.01 billion in revenue, an increase of 109% year over year. Adjusted earnings reached US$3.23 per share, compared with US$0.88 a year earlier. Adjusted gross margin stood at 50.4%, while adjusted operating margin reached 36.6%.
Management now expects revenue of US$1.225 billion to US$1.275 billion for the current quarter, along with an adjusted operating margin of 39.5% to 40.5%. According to the company, AI-related demand is accelerating the adoption of its 1.6T optical solutions and other technologies designed to connect an ever-growing number of processors within data centres.
Supply-chain constraints have limited sales in recent quarters despite very strong demand growth. As of September 1, the stock had already gained 148% since the beginning of 2026, following a 339% increase in 2025.
That performance has also come with significant volatility. On Monday, Lumentum opened approximately 7.1% lower than the previous close before ending the session down 9.9%. Two days later, the stock rebounded 9.6%.
For Lumentum, the focus is now on its ability to continue converting strong demand for AI infrastructure into sustained revenue and margin growth. Expectations are high, but the latest results show that growth in optical connectivity extends well beyond enthusiasm surrounding artificial intelligence alone.
Theme of the Week
Rates, Oil and Inflation: The U.S. Economy Remains Resilient
The U.S. Federal Reserve raised its policy rate by 25 basis points on Wednesday, bringing its target range to 3.75%–4.00%. It was the Fed’s first rate increase since 2023. The central bank pointed to inflation that remains elevated, while also noting that economic activity continues to expand at a solid pace, domestic spending remains resilient and investment continues to be robust.
The Fed’s latest economic projections highlight the challenge it currently faces. It now expects real GDP growth of 2.3% in 2026, slightly above its June projection. The unemployment rate is projected at 4.1%, compared with 4.3% previously. At the same time, PCE inflation is expected to reach 3.7%, still well above the Fed’s 2% target.
In other words, the central bank is trying to slow inflation in an economy that, so far, is showing no significant deterioration.
Oil has made that equation more complicated. Brent crude briefly reached US$109.80 per barrel earlier in the week before falling back toward US$102–103 on Friday morning. Concerns over Middle East supply initially pushed oil prices, bond yields and inflation expectations higher. As some of those concerns eased, both energy prices and bond yields retreated.
This helps explain the market’s reaction. After three difficult sessions, the S&P 500 rebounded 1.1% on Thursday, while the Nasdaq gained 1.7%. By Friday morning, markets were once again showing relatively limited movement: the S&P 500 was near flat, the Nasdaq was advancing and the Dow was modestly lower.
The week’s message is therefore more nuanced than a simple rate hike. Investors are dealing with persistent inflation, elevated bond yields and volatile oil prices, but also with a U.S. economy that continues to grow. So far, that resilience has allowed markets to absorb tighter financial conditions without a sustained correction.
Markets in Brief
Major indexes experienced significant swings over the course of the week. The initial shock from higher oil prices and concerns surrounding AI was followed by the Fed’s decision on Wednesday, then a strong rebound on Thursday as oil prices and bond yields declined.
On Friday morning, the S&P 500 was virtually unchanged on the day, the Nasdaq was up approximately 0.3% and the Dow was down about 0.3%. In Toronto, the S&P/TSX Composite opened 0.34% lower after gaining 1.1% on Thursday.
Markets in Numbers
Changes calculated from the close on Friday, September 11, through the market open on Friday, September 18, 2026.
S&P 500: −0.3%
Nasdaq Composite: +0.6%
Dow Jones: −1.8%
S&P/TSX Composite: +0.2%
Brent crude: −2.2%
WTI crude: +0.7%
U.S. 10-year yield: approximately 4.98%, virtually unchanged
U.S. 2-year yield: approximately 4.72%, up about 8 bps
CAD/USD: −0.9%
Brent crude was trading around US$102–103 per barrel Friday morning, compared with US$104.61 the previous Friday, while WTI remained close to US$101. The Canadian dollar was trading around US$0.714, compared with approximately US$0.721 the previous Friday.
Stocks in Brief
Generac Holdings (GNRC): +18.30%
The stock surged after the company announced an agreement with Amazon to supply generators for its data centres. Shares had opened approximately 31% higher.
Fluence Energy (FLNC): −15.40%
The company lowered its annual revenue outlook to approximately US$2.4 billion, citing supply-chain issues and production delays.
Lumentum Holdings (LITE): +9.60%
The stock rebounded sharply on Wednesday following weakness in AI-related names earlier in the week. Demand for optical connectivity continues to be supported by investment in data-centre infrastructure.
Nvidia (NVDA): −3.40%
The stock declined on Monday along with several AI-related companies after industry leaders called for a slowdown in the development of certain advanced systems.
CoreWeave (CRWV): −4.20%
The stock fell after the company announced a US$3 billion convertible bond offering to help fund continued investment and general corporate needs.
What to Watch Next Week
Following the Fed’s decision, markets will once again turn their attention to economic data. Preliminary U.S. manufacturing and services PMI readings are scheduled for Wednesday. Thursday will bring initial jobless claims and new home sales, followed on Friday by durable goods orders and the final University of Michigan consumer sentiment reading.
The earnings calendar will be quieter, but several well-known companies are scheduled to report. AutoZone is expected on Tuesday; General Mills, Cintas and Paychex on Wednesday; followed by Costco, Darden Restaurants, TD SYNNEX and BlackBerry on Thursday. FedEx is also on the calendar for Friday.
These results will provide useful insight into several areas of the economy — consumer spending, employment, technology and transportation — at a time when investors are trying to determine how long the U.S. economy can continue to withstand elevated interest rates.
