The Federal Reserve raised interest rates on Wednesday for the first time in three years, the 10-year Treasury yield touched its highest level since 2007, and the Nasdaq finished the four sessions higher than it started them. Any two of those three facts sit together comfortably. All three do not. That is why we built Winvesta Crisps, to cut through the noise and tell you what actually moved markets and why. 60,000+ investors from all over India are already in. What about you?
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Kevin Warsh's Federal Reserve raised its benchmark rate by a quarter point to 3.75% to 4.00% on Wednesday, unanimously, and 16 of 18 policymakers put another rise on the table before the year ends, per Investrade and the Fed's own projections. The Dow fell 631 points on the news. Then crude started coming back out of Saudi Arabia, the 10-year retreated from 5%, and on Thursday technology added 2.17% and carried the Nasdaq to its best session in weeks.
Through Thursday's close the Dow is down about 1.5% on the week, the S&P 500 is roughly flat at down 0.25%, and the Nasdaq is up about 0.3%. Three indices, three different stories, one Fed meeting.
📊 Market recap
Four sessions, and the week pivoted on Wednesday afternoon in a way almost nobody was positioned for.
Measured against last Friday's close of 7,656.98 on the S&P 500, 26,333.04 on the Nasdaq Composite and 52,573.29 on the Dow, Thursday left the S&P at 7,637.76, the Nasdaq at 26,418.30 and the Dow at 51,778.04, per CNBC, the Associated Press and Investrade. That is the S&P in the high-7,600s and essentially unchanged on the week, the Nasdaq in the mid-26,000s and slightly up, and the Dow in the high-51,000s and down around 1.5%. The Russell 2000 sits at 2,874.
Monday was an AI story, not a Fed story. Drones launched from Iraq damaged the Saudi East-West pipeline, the line that carries crude to the Red Sea and around the Strait of Hormuz, and Riyadh shut it. Brent jumped more than 3% towards $106, per Bloomberg and CNBC. Separately, Anthropic's chief executive Dario Amodei called publicly for a slowdown in frontier AI development and other senior figures in the industry backed him. Semiconductors took it badly. Nvidia fell more than 2%, Nokia dropped over 9% in pre-market trade, and a widely watched semiconductor gauge fell 5.9% in the rout, per Bloomberg. The S&P 500 closed down 0.48% at 7,619.98, the Nasdaq down 0.56% at 26,186.41 and the Dow down 152.09 points, or 0.29%, at 52,421.20, per TheStreet and Yahoo Finance.
Tuesday the bond market took over. The 10-year Treasury yield rose to 5.041%, its highest since 2007, as traders priced in what the Fed was about to do. The Dow lost 328.09 points, or 0.63%, to 52,093.11, the S&P 500 fell 0.45% to 7,585.73 and the Nasdaq dropped 0.78% to 25,981.57, per CNBC and Investing.com. It was the sixth decline in seven sessions. The interesting part sat underneath the index. Qualcomm rose more than 4%, Advanced Micro Devices gained 2% and Coherent added nearly 2%, all of them names that had been sold the day before. The AI trade was already being bought back while the tape was still red.
Wednesday the Fed did it. A quarter-point rise to 3.75% to 4.00%, unanimous, the first increase in three years. The Summary of Economic Projections showed 16 of 18 officials expecting one more rise before the end of 2026, with rates then held through 2027, per Investrade. Warsh was blunt about why. Per Yahoo Finance's account of the press conference, he said: "Our predominant focus is on the price stability side of our mandate. The plain fact is that inflation is too high and has been for too long." The Dow fell 630.56 points, or 1.21%, to 51,461.90. The S&P 500 lost 33.92 points, or 0.44%, to 7,551.81. The Nasdaq fell 3.15 points and finished effectively unchanged at 25,978.43. Eight of the 11 S&P sectors closed lower, with energy down more than 2.8% and financials down more than 1.5%, per Investrade. The 10-year settled at 5.003%, a fresh 52-week high, and the two-year pushed above 4.72%, its highest in more than two years.
Read that Nasdaq number again. On the day the Federal Reserve raised rates for the first time since 2023 and promised another, the technology index moved three points.
Thursday the oil price answered the Fed. Saudi Arabia signalled crude would start flowing again and the supply premium came out of the market. WTI settled at $101.91 and Brent at $104.82, both lower for a second day, per Investrade. The 10-year fell six basis points to 4.934%, snapping an eight-session rising streak, per Bloomberg. Weekly jobless claims came in at 196,000 against 206,000 the week before, the Philadelphia Fed business conditions index dropped to 37.8 from 47.4, and August housing starts fell 2.6% to 1.275 million units. Equities rose anyway. The Dow gained 317.95 points, or 0.62%, to 51,778.04, the S&P 500 added 85.90 points, or 1.14%, to 7,637.76, and the Nasdaq rose 439.87 points, or 1.69%, to 26,418.30. Technology led all sectors at plus 2.17%, with consumer discretionary up 1.58%.
Friday has not happened yet at the time of writing. The US session opens after this article reaches you.
The week's verdict is that the Fed was not the biggest variable in the room. Crude was. Markets fell for three sessions while a pipeline was shut and rallied the moment it looked like reopening, and the rate decision in the middle of all that mostly rearranged which index took the damage.
😶🌫️ Sentiment watch
The CNN Fear and Greed Index read 29 to 30 through Thursday, in Fear territory, per CNN and Investrade. The VIX closed Wednesday at 15.08 and sat near 15.09 on Thursday morning, per Yahoo Finance and CBOE data.