Finance
Two Hikes in One Week, and Tech Still Won Friday
Two central banks raised interest rates in a single week, and the market's answer arrived on Friday in split screen. The Federal Reserve's Wednesday hike, its first in more than three years under Chair Kevin Warsh, was followed on Friday by the Bank of Japan raising borrowing costs as it works to contain price pressures. The Nasdaq still finished the week higher. The Dow lagged: it fell 122 points on Friday, or 0.2 percent, closing its third straight weekly decline and its largest slide across three weeks since March, while the S&P 500 ticked 0.2 percent higher and the Nasdaq Composite rose 0.4 percent.
The hero of the relief rally was an unlikely one: cheaper oil. Brent crude slid 2.1 percent to 102.60 dollars a barrel early Friday and West Texas Intermediate dropped 1.9 percent to 99.93, the third straight day of declines, even as Saudi Arabia and Yemen's Houthis, backed by Iran, exchanged fresh strikes across their border. Deutsche Bank analyst Jim Reid put it plainly: the first half of September lived up to the month's rough reputation, and the oil price matters more than the calendar right now. Cheaper crude eased inflation fears, pulled Treasury yields back from their highs, and gave growth stocks room to breathe.
The bond market's round trip tells the story. The 10 year Treasury closed above 5 percent for the first time since 2007 on Fed decision day, then fell back below 4.98 percent as oil softened the mood. The two year yield finished at 4.741 percent, its highest afternoon close since July 1, 2024. Traders now see a 47.1 percent chance of another quarter point hike and a 42.4 percent chance of a half point of hikes through December, according to the CME FedWatch tool. Warsh's message, that inflation remains too high and has been for too long, landed, and so did the market's reply: priced in, moving on.
Underneath the rates drama, corporate health keeps surprising to the upside. Goldman Sachs chief US equity strategist Ben Snider wrote this week that while S&P 500 earnings growth shows signs of running hot, the firm's base case is for growth to cool gradually in coming years. UniCredit chief economist Marco Valli said the bank is growing more confident that Warsh's Jackson Hole speech and the hike marked important steps toward reestablishing policy credibility. Morgan Stanley's Daniel Skelly added that strong fundamentals and growing AI adoption should carry the market past the Fed's tightening.
For savers and borrowers, the message of the week is steadiness: rates are higher, the path follows the data, and the economy keeps absorbing it. For investors, Friday's split screen was the whole thesis in miniature: own the earnings growers while the central banks do the tightening.
Quick answers
What is this story about?
Two central banks raised interest rates in a single week, and the market's answer arrived on Friday in split screen. The Federal Reserve's Wednesday hike, its first in more than three years under Chair Kevin Warsh, was followed on Friday by the Bank of Japan raising borrowing costs as it works to contain price pressures. The Nasdaq still finished the week higher. The Dow lagged: it fell 122 points on Friday, or 0.2 percent, closing its third straight weekly decline and its largest slide across three weeks since March, while the S&P 500 ticked 0.2 percent higher and the Nasdaq Composite rose 0.4 percent.
Why does this story matter?
For savers and borrowers, the message of the week is steadiness: rates are higher, the path follows the data, and the economy keeps absorbing it. For investors, Friday's split screen was the whole thesis in miniature: own the earnings growers while the central banks do the tightening.
Sources
- Reuters: Nasdaq futures lead as oil retreats
- Barron's: stock futures rise as post-Fed tech rally continues
- Morningstar: stocks rally, yields fall as lower oil boosts market mood
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