Stocks, Bonds Fall as Oil Jump Fuels Fed-Hike Bets: Markets Wrap
(Bloomberg) — Another rally in oil prices sent stocks and bonds lower, with the latest inflation data reinforcing bets the Federal Reserve will lift interest rates soon amid pressures from higher energy costs.
Brent crude topped $105 as Middle East tensions heightened concerns over global supplies. Two-year yields jumped 10 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 four-day drop in the S&P 500 was set to be the longest since June, with chipmakers sinking.
The producer price index rose 0.4% in August from the prior month — the most since May — and 5.4% from a year earlier, according to Bureau of Labor Statistics data. Excluding food and energy, the gauge advanced 0.2% last month and 4.6% from a year ago.
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 and while interest-rate movements can’t bring high oil prices down, the Fed’s job is to respond to inflationary pressures,” said Clark Bellin at Bellwether Wealth.
“As the conflict with Iran drags on longer than many expected, inflation pressures are becoming increasingly entrenched, leaving investors in search of a catalyst strong enough to change the inflation narrative,” said Jeffrey Roach at Financial. “At this rate, a hike in rates next week appears likely.”
With the PPI data overall still looking relatively hot, the Fed seems likely to hike this year even if it doesn’t pull the trigger this month, according to Stephen Brown at Capital Economics.
“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.”
Elsewhere, the European Central Bank lifted rates for the second time since the Iran war broke out, with a rally in oil prices prompting investors to boost bets on further hikes. President Christine Lagarde called the latest policy decision “a no brainer.”
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 third-quarter guidance left investors unimpressed, overshadowing a strong quarterly performance and increase in outlook. JetBlue Airways Corp. cut its third-quarter 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 10:30 a.m. New York time The Nasdaq 100 fell 0.8% The Dow Jones Industrial Average fell 0.4% The Stoxx Europe 600 fell 0.5% The MSCI World Index fell 0.5% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro was little changed at $1.1624 The British pound fell 0.2% to $1.3520 The Japanese yen fell 0.3% to 153.95 per dollar Cryptocurrencies
Bitcoin fell 1.2% to $77,336.2 Ether fell 1.2% to $2,442.04 Bonds
The yield on 10-year Treasuries advanced seven basis points to 4.91% Germany’s 10-year yield advanced five basis points to 3.49% Britain’s 10-year yield advanced nine basis points to 5.35% Commodities
West Texas Intermediate crude rose 3% to $98.97 a barrel Spot gold fell 0.7% to $4,366.85 an ounce ©2026 Bloomberg L.P.
