The Fed's First Hike in Three Years

The FOMC raised rates a quarter point to 3.75% to 4.00% on Wednesday in a unanimous vote, its first increase since July 2023, and signaled more to come. Chair Warsh said inflation has been "too high for too long." The 10-year Treasury yield closed above 5% for the first time since 2007, then eased to 4.93% Thursday as oil retreated. The CME FedWatch Tool now puts October hike odds at 58%, with a 90% probability of at least one more hike by December and a 44% probability of two.

Markets Absorb the Hike

Wednesday's reaction was sharp: the Dow fell 631 points and the S&P 500 posted its seventh loss in eight sessions, reaching a six-week low, while the dollar hit its highest since July and gold fell 1.2% and silver 1.7%. Thursday reversed much of it as yields and oil eased, and Friday's session was quiet. For the week, the S&P 500 slipped 0.1% to 7,651, the Nasdaq rose 0.7% to 26,523, and the Dow fell 1.7% to 51,683, its third straight weekly decline, with the 10-year yield finishing back above 5%. The CNN Fear & Greed Index slipped to 29 (Fear), its lowest reading since late June.