Stocks, Bonds Fall as Oil Jump Fuels Fed-Hike Bets: Markets Wrap
(Bloomberg) — Another rally in oil prices spurred losses in stocks and bonds, with the latest inflation data reinforcing bets the Federal Reserve will lift interest rates soon amid pressures from higher energy costs.
Brent crude touched $107 as Middle East tensions heightened supply worries. US diesel futures rose above $5 a gallon for the first time since 2022. Two-year yields jumped 11 basis points while those on 30-year bonds hit the highest since 2007. Traders boosted wagers on a Fed hike next week to 70% and fully priced in a move by October. The S&P 500 fell for a fourth straight day.
The producer price index showed renewed pressure from higher energy costs in August, climbing the most in three months.
Those figures were released ahead of Friday’s consumer price index, which is expected to show an acceleration in August from a month earlier, due in part to higher gasoline costs. Stripping out the volatile energy and food components, the core CPI is projected to have risen by a more moderate pace.
Some Fed officials have signaled the rate decision at their Sept. 15-16 meeting may come down to what this week’s reports reveal.
“Inflation is still a problem,” said Clark Bellin at Bellwether Wealth. “While interest-rate movements can’t bring high oil prices down, the Fed’s job is to respond to inflationary pressures.”
At LPL Financial, Jeffrey Roach noted that as the Iran war keeps dragging on, inflation pressures are becoming more and more entrenched. At this rate, a Fed hike next week appears likely, he added.
“We still do not think a hike is anywhere close to a slam dunk just yet,” said Krishna Guha at Evercore. “That said, the Fed may be running out of road to accommodate another renewed supply shock without additional reassurance on underlying inflation missing from the PPI components.”
Guha noted his firm put its “no-Fed-hike call” under review and will update once the CPI report is released.
“Inflation is a physical constraint and geopolitical problem, not a monetary problem,” said Brian Jacobsen at Annex Wealth Management. “If the Fed hikes next week, it should be a symbolic hike to assert its independence and build credibility and not in the hope that it will actually fix the inflation problem.”
Meantime, the European Central Bank lifted rates for the second time since the Iran war broke out, with higher oil prices prompting bets on more hikes.
Corporate Highlights:
Oracle Corp. shares are struggling this year as Wall Street balks at the massive debt load the company has taken on to build out artificial-intelligence infrastructure. Its earnings Thursday will give an indication of how much patience investors have left for such heavy spending. Macy’s Inc.’s guidance left investors unimpressed, overshadowing a strong quarterly performance and increase in outlook. JetBlue Airways Corp. cut its capacity outlook after weather and air traffic control disruptions snarled operations in the northeastern US. American Eagle Outfitters Inc.’s second-quarter total comparable sales fell short of the average analyst estimate. DeepSeek rolled out an AI model that charges as little as a fraction of a cent per million tokens, ramping up the pressure on rivals from Anthropic PBC to Z.AI Co. What Bloomberg strategists say…
“PPI data has only reinforced the case for tighter policy and, at the margin, gives the rise in yields a firmer fundamental footing. That said, some of it can be caveated by yet another sharp rise in oil.”
—Brendan Fagan, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.4% as of 1:02 p.m. New York time The Nasdaq 100 fell 0.7% The Dow Jones Industrial Average fell 0.5% The MSCI World Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.1% to $1.1619 The British pound fell 0.2% to $1.3521 The Japanese yen fell 0.5% to 154.30 per dollar Cryptocurrencies
Bitcoin fell 1.5% to $77,107.73 Ether fell 1% to $2,446.81 Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.91% Germany’s 10-year yield advanced six basis points to 3.50% Britain’s 10-year yield advanced 11 basis points to 5.37% Commodities
West Texas Intermediate crude rose 5.5% to $101.37 a barrel Spot gold fell 0.8% to $4,362.31 an ounce ©2026 Bloomberg L.P.
