Stocks, Bonds Rise in Countdown to Fed Decision: Markets Wrap

(Bloomberg) — Stocks joined bonds higher after days of selling as oil prices fell, with traders betting the Federal Reserve will boost rates to fight inflation and defend its credibility.

Equities rebounded from the lowest since July, with the S&P 500 halting back-to-back losses. A rally in chipmakers also buoyed sentiment. Treasury 10-year yields dropped from a nearly two-decade high. Brent crude slipped to $107 a barrel after rising 4% over the previous two sessions.

The Fed is expected to lift interest rates for the first time since 2023 as policymakers lose confidence that inflation will cool sufficiently without at least a nudge from the central bank.

“It’s Fed day and the central bank is widely expected to follow through with a quarter-point rate hike to defend its credibility as an inflation fighter,” said Ian Lyngen at BMO Capital Markets.

Officials will release a post-meeting statement at 2 p.m. in Washington, together with updated economic forecasts and rate projections. Fed Chair Kevin Warsh is scheduled to hold a post-meeting press conference 30 minutes later.

Economists in a recent Bloomberg survey expected policymakers to hold their outlooks for unemployment and inflation largely unchanged. Projections for rates should reveal how many officials expect additional rate hikes this year.

In the run-up to the Fed decision, data showed US retail sales rose by the most in five months in a broad advance, showing consumers continued to spend despite rising gasoline prices.

“The data is hawkish, and the case for a rate hike keeps growing,” said David Russell at TradeStation.

Markets look well positioned to accept a Fed rate hike, according to Jim Baird at Plante Moran Financial Advisors. If anything, a decision to stand pat will raise more questions about what exactly the Fed is waiting for, he added.

History suggests that a transition from a prolonged pause to renewed tightening has not necessarily derailed equity markets, noted Adam Turnquist at LPL Financial. Outcomes have been especially favorable when the pause was preceded by a rate cut rather than a rate hike.

Historically, following a rate hike that ended a pause of six months or longer, the S&P 500 gained an average of 5.5% over the subsequent 12 months, he added. Across the 12 instances since 1972, the average maximum drawdown during that period was 9.4%.

“As the Fed begins what we expect to be a relatively shallow tightening cycle, we believe investors should remain positioned for further equity gains while preparing for near-term volatility,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.

Corporate Highlights:

Apple Inc. is working on an enterprise server using its own chips and has had discussions with Nvidia Corp. about using its networking equipment, the Information reported. SK Hynix Inc. said that it’s exploring options to boost its global competitiveness after a report that it may team up with Intel Corp. to make semiconductors in the US. Meta Platforms Inc. Chief Executive Officer Mark Zuckerberg said AI labs should rely on independent evaluators and advisers to ensure that models are safe. Microsoft Corp. AI chief Mustafa Suleyman is warning that infusing tools like Anthropic’s Claude with humanlike characteristics increases the risks of such systems going rogue. OpenAI is holding early talks with investors about a fresh funding round that would value the ChatGPT creator at more than $1.2 trillion ahead of an initial public offering. JB Hunt Transport Services Inc. warned that higher costs for fuel and recruiting truckers will hurt its earnings. Some of the main moves in markets:

Stocks

The S&P 500 rose 0.2% as of 10:31 a.m. New York time The Nasdaq 100 rose 0.7% The Dow Jones Industrial Average fell 0.3% The Stoxx Europe 600 rose 0.4% The MSCI World Index rose 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1538 The British pound fell 0.2% to $1.3455 The Japanese yen was little changed at 155.17 per dollar Cryptocurrencies

Bitcoin fell 0.2% to $75,695.95 Ether fell 0.6% to $2,391.42 Bonds

The yield on 10-year Treasuries declined four basis points to 4.97% Germany’s 10-year yield declined one basis point to 3.52% Britain’s 10-year yield declined seven basis points to 5.32% Commodities

West Texas Intermediate crude fell 2.2% to $103.47 a barrel Spot gold rose 1% to $4,336.13 an ounce ©2026 Bloomberg L.P.