September split the equity market in two. The Nasdaq Composite rose 1.86% to 26,861.06 as technology finished as the only S&P 500 sector higher on the month, up roughly 5%. Almost everything else lost ground. The S&P 500 slipped 0.45% to 7,651.54, the Dow fell 4.29% to 50,906.05, ending a five-month winning streak, and the Russell 2000 dropped 5.40% to 2,796.86. Financials, materials and real estate each fell about 7%, while utilities and consumer discretionary lost about 6%. The cause was the price of money. The Federal Reserve raised rates on September 16, and over the month the 10-year Treasury yield rose 54 basis points to 5.29%. For the third quarter, the S&P 500 gained about 2.0%, the Nasdaq 2.5%, and the Dow lost 2.7%.

The Fed Hikes · 12–0, First Increase Since 2023

The FOMC voted unanimously, 12–0, to raise the federal funds target range by 25 basis points to 3.75%–4.00%. It was the Committee's first increase since 2023 and reversed the December 2025 cut. "Inflation remains elevated," the statement said. "Today's policy action will support a timelier return to the Committee's 2 percent goal." At his press conference, Chair Kevin Warsh said inflation "is too high and has been for too long" and called the move a decision to "remove a dose of accommodation." The new projections lean hawkish. Sixteen participants expect at least one more hike in 2026, and the median path puts the policy rate near 4.1% at the end of both 2026 and 2027. The Fed now projects headline and core PCE inflation of 3.7% and 3.4% for 2026, and it does not see inflation back at 2% until 2029. Stocks sold off into the close that day. The S&P 500 fell about 1% to a six-week low just above 7,500, and the 10-year yield climbed back to 5%.

August CPI · Gasoline Drives the Headline, Core Firms

The August CPI, released September 11, settled the hike debate. Headline prices rose 0.4% on the month, up from 0.1% in July, and held at 3.4% year-over-year. Gasoline rose 3.9% and accounted for more than a third of the monthly increase. It is now up 27.4% from a year earlier, and the broader energy index is up 16.3%. Core CPI rose 0.3%, a tenth above forecast, although the annual rate eased to 2.4% from 2.5%. Shelter rose 0.3% after 0.1% in July, and airline fares are up 23.4% over the year, showing fuel costs reaching services prices. After the release, traders priced roughly 90% odds of a September hike.

Hiring Rebounds · 162,000 Jobs and Upward Revisions

The August Employment Situation, released September 4, removed the labor-market argument for waiting. Payrolls rose 162,000, far above the roughly 53,000 consensus and the strongest gain since March. Revisions also helped: July's reported 23,000 decline became a 21,000 gain, and June was raised to +31,000. The unemployment rate held at 4.1%, participation edged up to 61.6%, and average hourly earnings rose 0.3% to $37.75, up 3.1% from a year earlier. That is still below headline inflation, so real wages are falling. With hiring back and inflation sticky, the FOMC had cover to act.

The Bond Rout · 10-Year at a 24-Year High

The month's biggest move came in Treasuries. A global bond selloff pushed the 10-year to about 4.94% on September 11, and it traded around or above 5% for much of the second half. Around September 24, a fresh jump in oil prices, a 58.4 flash composite PMI (the strongest since July 2021) and a $70 billion five-year auction pushed the 30-year to its highest level since 2004, with a closing high of 5.49%. On September 30 the 10-year touched 5.304% intraday, above its 2007 peak and the highest since May 2002, before closing at 5.297%. The 30-year finished near 5.65%. The 10-year TIPS yield rose about 44 basis points, its fastest monthly increase in four years. The 30-year fixed mortgage rate in the MBA survey reached 7.3%, its highest since November 2023. Treasury announced a buyback of up to $6 billion in 10- to 20-year debt for October 1.

PCE Revised Lower · GDP Revised Higher

On September 30, BEA released August Personal Income and Outlays together with its 2026 annual update, and the revisions changed the inflation picture. Headline PCE prices rose 0.3% on the month and 3.4% year-over-year, against expectations of 3.7%. Core PCE rose 0.2% and 3.0%, against expectations of 3.3%. July was also revised down, to 3.4% headline and 3.0% core from 3.7% and 3.3%. Much of that improvement came from methodology changes to software, legal services and portfolio-management fees, not from slower price growth. Growth was revised the other way. Q2 real GDP was raised to 2.2% from 1.5%, Q1 to 2.5% from 2.1%, and Q2 consumer spending to 3.8%. Sentiment data were weak, however. On September 29, the Conference Board's consumer confidence index fell to 81.9, its lowest since 2014, and August job openings came in at 7.079 million, below the 7.23 million forecast. After New York Fed President John Williams said there was "no need for urgency," market odds of an October hike fell to roughly even from more than 70%.

Hormuz Stays Shut · Ottawa Retaliates · OPEC+ Holds

Geopolitics kept energy prices high. Iran's closure of the Strait of Hormuz remained in place, and the Houthis began blocking Saudi energy exports. On Friday, September 25, Tehran proposed a seven-day ceasefire to reopen the strait and resume nuclear talks. President Trump rejected it that weekend and said Iran's leaders wanted a deal because "they are losing so badly." On September 27, the Revolutionary Guard said it had seized a U.S. submarine drone in the strait. Earlier in the month, on September 6, the seven core OPEC+ producers kept October output unchanged, with the Iran war limiting how much their quotas can affect physical supply. On September 8, Canada imposed retaliatory tariffs of 15% to 50% on CA$27.6 billion of U.S. goods, matching Washington's 50% duties rate for rate. November WTI settled at $90.42 on September 30, up 4.92% on the month, and Brent settled at $103.53.

Cross-Asset Repricing · Gold Down, Dollar and Memory Up

Higher real yields hit gold, which had been the strongest asset in August. Spot gold fell 6.16% to $4,158.70 an ounce, ending a two-month winning streak, and is now 3.51% below its Dec. 31 level. The U.S. Dollar Index rose 1.94% to 101.37. The dollar gained nearly 2.5% against the euro, which touched $1.1312 on September 29, its lowest since May 2025. Bitcoin rose 6.36% to $83,556, completing its first July-through-September winning streak since 2012, though it remains 4.51% below its year-end level. The tech rally got further support after the close on September 30. Micron reported record fiscal fourth-quarter revenue of $54.23 billion, up from $11.32 billion a year earlier, and guided to $61.5 billion for the current quarter. AI spending continues to justify valuations even with the 10-year above 5%.