Stocks, Bonds Drop as Oil Spike Boosts Fed Wagers: 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 increase rates soon amid pressures from higher energy costs.

The jump in Brent crude to more than $107 lifted US yields to multi-year highs. Traders boosted wagers on a Fed hike next week to 70% and fully priced in a move by October. The market also got hit after the Treasury bought back $5.19 billion worth of debt, short of the amount it had outlined. The S&P 500 fell for a fourth straight day, the longest retreat since June.

A gauge of producer inflation showed renewed pressure from rising energy prices last month. The figures came a day ahead of the the consumer price index, which is expected to show core inflation was relatively modest even as gasoline prices boosted the headline measure.

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.”

As the Iran war keeps dragging on, inflation pressures are becoming more entrenched, said Jeffrey Roach at LPL Financial. At this rate, a Fed hike next week appears likely, he added.

While a hike isn’t a “slam dunk” just yet, the Fed may be running out of road to accommodate another renewed supply shock without additional reassurance on underlying inflation, according to Krishna Guha at Evercore.

That said, his firm put its “no-Fed-hike call” under review and will update once the CPI report is released Friday.

“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. reported growth in its cloud computing business that topped analysts’ estimates, suggesting the company’s large AI data center projects are helping boost its financial results. Adobe Inc. gave an outlook for sales that narrowly missed analysts’ estimates, renewing concerns about pressure from artificial intelligence upstarts. Cybersecurity is the next big market for AI, with advances in the technology set to disrupt an industry geared to defending computer systems, said Nvidia Corp. Chief Executive Officer Jensen Huang. Anthropic PBC accused Moonshot AI of covertly routing thousands of user requests to the US firm’s Claude models and passing off the responses as its own in a bid to gain an edge in the AI race. Macy’s Inc.’s guidance left investors unimpressed, overshadowing a strong quarterly performance and increase in outlook. 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 0.6% as of 4 p.m. New York time The Nasdaq 100 fell 1.1% The Dow Jones Industrial Average fell 0.6% The MSCI World Index fell 0.7% Currencies

The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.2% to $1.1610 The British pound fell 0.3% to $1.3509 The Japanese yen fell 0.5% to 154.34 per dollar Cryptocurrencies

Bitcoin fell 1.5% to $77,150.23 Ether fell 0.4% to $2,462.3 Bonds

The yield on 10-year Treasuries advanced 11 basis points to 4.95% 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 7% to $102.78 a barrel Spot gold fell 1.7% to $4,324.15 an ounce ©2026 Bloomberg L.P.