Stocks Fall in Run-Up to Fed as Yields Stay High: Markets Wrap

(Bloomberg) — Wall Street traders refrained from making riskier bets in the countdown to the Federal Reserve decision, with stocks falling as elevated oil prices kept bond yields at multi-year highs.

Almost 400 companies in the S&P 500 retreated. The Dow Jones Industrial Average dropped 1%. Treasury 10-year yields topped 5%, the highest in nearly two decades. Brent crude climbed to around $107. The dollar rose. Cryptocurrencies got pummeled as optimism waned that a key US regulatory bill will progress this week.

Three major central bank decisions — starting with the Fed on Wednesday and followed on successive days by peers in the UK and Japan — may recast the monetary policy landscape for the rest of 2026.

The US will be most closely watched in the wake of last week’s higher-than-expected core inflation figures. That stoked investor bets that Fed Chair Kevin Warsh and his colleagues will raise their benchmark rate for the first time in three years.

With markets pricing a roughly 90% probability of a September hike, the focus is shifting from whether the Fed will tighten to what the start of another hiking cycle means for equities, according to Dennis DeBusschere at 22V Research.

“The debate has shifted from ‘if’ to ‘how much’ tightening this cycle will require to restore price stability,” said Seema Shah at Principal Asset Management. “A one-and-done hiking approach is unlikely.”

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Among the reasons, Shah cites five years of above-target inflation, ongoing trade disruptions, elevated oil prices, and rising inflationary pressures from the artificial-intelligence spending buildout.

“The combination of higher interest rates and elevated oil prices is like asking equities to run a marathon with ankle weights strapped on,” said Darrell Cronk at Wells Fargo Investment Institute. “Higher rates increase the discount rate investors apply to future earnings, while higher energy costs drain purchasing power from consumers and pressure profit margins.”

The result is a market that must work harder to generate earnings growth just as investors become less willing to pay premium valuations for that growth, he added.

Carlyle Group Inc. Chief Executive Officer Harvey Schwartz says he doesn’t see the Fed repeatedly tightening policy, even though the market appears to be pricing in that expectation.

“The markets are obviously expecting a hike,” he told Bloomberg Television. “But it doesn’t feel like we’re entering a hiking cycle — it doesn’t feel like we’re entering a cycle where we’re going to be cutting rates aggressively.”

Corporate Highlights:

OpenAI is working on steps to address AI safety issues with its top competitors Anthropic PBC and Google DeepMind, escalating industry efforts to respond to a groundswell of concern that the technology poses an economic and security threat. Meta Platforms Inc. plans to begin deploying a new in-house AI chip in data centers during the first half of next year, a move it says will save money and energy when running AI models. Nvidia Corp. Chief Executive Officer Jensen Huang took a live phone call from Donald Trump during a panel discussion Monday, allowing the US president to dismiss AI dangers as a “hoax.” Wells Fargo & Co. Chief Financial Officer Michael Santomassimo said that the lender’s net interest margin is expected to be better than initially expected. General Motors Co. is integrating Apple Inc.’s CarPlay in its latest infotainment system, three years after upsetting some consumers by eliminating the popular interface from its electric vehicles. Some of the main moves in markets:

Stocks

The S&P 500 fell 0.5% as of 10:31 a.m. New York time The Nasdaq 100 fell 0.4% The Dow Jones Industrial Average fell 1% The Stoxx Europe 600 fell 0.3% The MSCI World Index fell 0.5% Currencies

The Bloomberg Dollar Spot Index rose 0.1% The euro was little changed at $1.1551 The British pound was little changed at $1.3493 The Japanese yen fell 0.4% to 154.97 per dollar Cryptocurrencies

Bitcoin fell 3.7% to $76,181.57 Ether fell 5.4% to $2,432.72 Bonds

The yield on 10-year Treasuries advanced two basis points to 5.01% Germany’s 10-year yield advanced three basis points to 3.55% Britain’s 10-year yield advanced five basis points to 5.41% Commodities

West Texas Intermediate crude rose 2.4% to $103.83 a barrel Spot gold fell 0.4% to $4,282.20 an ounce ©2026 Bloomberg L.P.