Fed Hikes for the First Time Since 2023, and the 10-Year Cracks 5%

The week's central story arrived Wednesday afternoon: the Federal Reserve raised interest rates for the first time since 2023. In a unanimous decision, the FOMC lifted the fed funds target range by 25 basis points to 3.75-4.00%, ending a three-year pause. The Dow immediately tumbled more than 600 points, and by the closing bell was down 1.2%. Fed Chair Kevin Warsh set the hawkish tone in his post-decision press conference: "The plain fact is that inflation is too high and has been for too long." The Fed's updated dot plot projected the median fed funds rate at 4.125% by year-end, with 16 of 18 officials expecting at least one more hike this year. Notably, Warsh confirmed he did NOT submit his own dot to the Summary of Economic Projections.

Equity markets diverged sharply across the week. The Dow bore the brunt, falling -1.69% to 51,682.64: its worst week since March. The Russell 2000 dropped -1.50% to 2,860.40. The S&P 500 held roughly flat at -0.08% to 7,650.50. But the Nasdaq quietly outperformed, rising +0.72% to 26,522.55: proof that the AI trade still has a bid even in a hiking cycle. Thursday delivered a strong recovery rally as investors began to price in the higher-for-longer reality; Friday brought a mixed close as the 10-year Treasury edged back toward 5%.

10-Year Cracks 5%, Saudi Pipeline Attack Rattles Oil

The 10-year Treasury yield topped 5.00% early in the week: its first time above that threshold since 2023. Yields eased briefly after the Fed decision, but the 10-year returned above 5% Friday, finishing at 5.01% (up roughly 6 bps on the day). Oil markets also gyrated: a drone attack launched from Iraq damaged Saudi Arabia's critical East-West pipeline last Thursday, sending crude spiking earlier in the week. By Friday, WTI settled at $100.30 (roughly flat on the week, first time above $100 in months) and Brent at $103.87 (down about 1%). The dollar index (DXY) firmed to 99.95, while gold rebounded to $4,391 as yields eased late.

Prime Rate Rises to 7.00%, Tech Leads Recovery

With the Fed's move, the U.S. prime rate rose to 7.00%, immediately affecting borrowing costs on credit cards, HELOCs, and business loans. Yet Thursday's tech-led rebound rally suggested some investors are eager to look past a higher-for-longer environment and back into the AI story. Dell, Intel, and Nvidia all finished Wednesday in the green even as the broader market fell, and the Nasdaq's +0.7% weekly gain widened its YTD lead over the S&P 500. As Certuity CIO Scott Welch put it, "Some uncertainty was removed this week when the Fed hiked rates."

Fed Speaker Parade, Micron and Costco, and August PCE Inflation

With the Fed hike behind us and markets pricing in another before year-end, attention turns to Friday's August PCE inflation report: the Fed's preferred inflation gauge and the first read markets will get after Wednesday's decision. A hot print raises pressure for the October or December hike the dot plot implies; a cool print gives Warsh room to pause. Between now and then, expect a parade of Fed speakers offering their post-hike interpretations, plus Micron earnings Tuesday and Costco Thursday to gauge tech and consumer health.

Mon Sep 21: Fed Speakers & Positioning

Multiple FOMC officials scheduled to speak throughout the week: the first opportunity for post-hike commentary. Markets will parse each statement for hints on the pace and size of subsequent moves. Light data day otherwise.

Tue Sep 22: Existing Home Sales & Micron

August existing home sales at 10:00 AM ET. With mortgage rates climbing alongside the 10-year yield, affordability is back in focus. Micron reports fiscal Q4 earnings after the close: memory demand, HBM ramp for AI, and China commentary are the key items.

Wed Sep 23: New Home Sales

August new home sales at 10:00 AM ET. Homebuilder sentiment has been fragile as mortgage rates approach 7.5%. More Fed speakers scheduled.

Thu Sep 24: Q2 GDP Final, Costco, Jobless Claims

Q2 GDP third estimate at 8:30 AM ET. Weekly jobless claims and August durable goods orders also release. Costco reports fiscal Q4 earnings after the close: a key consumer-health signal for higher-income households.

Fri Sep 25: AUGUST PCE INFLATION

The main event. August PCE inflation at 8:30 AM ET. This is the Fed's preferred inflation gauge and the first inflation reading markets will digest after the September hike. Consensus expects headline PCE around 2.9% and core PCE around 2.7%. Any upside surprise reinforces the case for an October hike.

With the fed funds rate at 3.75-4.00%, the 10-year at 5.01%, and WTI back above $100, cross-asset positioning is unmistakably late-cycle. The S&P 500 at 7,650.50 remains roughly 1.9% below its recent all-time high. A cooler-than-expected PCE print Friday could reset risk appetite and put fresh records in play. A hot print, combined with sustained energy-driven inflation, sets up a difficult final quarter for equities. Watch the 10-year: sustained trade above 5.00% shifts the entire risk calculus.