Fed decides at 2 p.m. with a hike 93% priced and oil up 4.2%

The Federal Reserve announces its decision at 2 p.m. ET today, and traders price roughly a 93% chance it raises rates — the first increase since 2023. The number that arrives first may matter as much: August retail sales at 8:30 a.m. ET, into a market where the consumer was already the weakest thing on the board.

Tuesday was the sixth decline in seven sessions

The S&P 500 fell 0.45% to 7,585.73, the Nasdaq Composite 0.78% to 25,981.57 and the Dow Jones Industrial Average 328.09 points, or 0.63%, to 52,093.11. In our feed, SPY, the S&P 500 fund, lost 0.46%; QQQ lost 0.65%, DIA 0.62% and IWM, the small-cap fund, 0.96%.

The breadth was worse than the index moves. 68 of the 100 stocks and funds we track fell, and 32 rose. That is a real reversal from Monday, when 55 of the same 100 finished higher while the chip stocks dragged the indexes down. This time the selling was broad rather than concentrated.

Mega-cap technology was mixed but not the problem. Microsoft (MSFT) fell 1.64%, Amazon (AMZN) 2.02%, Alphabet (GOOGL) 1.26%, Broadcom (AVGO) 1.58% and Apple (AAPL) 0.52%, while Nvidia (NVDA) rose 0.57% and Meta (META) 0.70%. The heavier damage sat in second-tier growth: General Electric (GE) fell 3.31%, Oracle (ORCL) 3.07%, Netflix (NFLX) 3.01%, Shopify (SHOP) 3.01%, Adobe (ADBE) 2.95% and Snowflake (SNOW) 2.82%.

Two groups went the other way, for reasons that had nothing to do with the macro. Smartphone chips rallied: Qualcomm (QCOM) rose 4.25% to $187.80, and our movers feed had Skyworks Solutions up 13.59% to $90.00 and Qorvo up 9.28% to $117.98. Skyworks CEO Phil Brace said last week that the $22 billion Qorvo merger has entered its final regulatory phases, with approvals pending in two jurisdictions, and Apple’s newly unveiled foldable iPhone gave both suppliers a read-across. Lab-equipment stocks also rose: Thermo Fisher (TMO) gained 4.53% to $641.39, and the movers feed had Revvity up 9.04%, Schrodinger 12.04% and Tempus AI 10.66%. Yahoo Finance’s recap tied Revvity’s move to executive comments about strong instrument backlogs.

Oil at $105 and a 5% 10-year are one trade

WTI crude jumped 4.2% to $105.70 and Brent 2.7% to $108.55, according to Yahoo Finance’s recap, after reports of Houthi strikes on Saudi Arabia and regional pipeline closures. The 10-year Treasury yield touched 5.041% during the session, its highest level since 2007, and settled near 5.00%.

These are not two stories. The bond market is selling off because the Iran conflict keeps energy costs elevated, which keeps inflation elevated, which is the same reason the Fed is expected to move today. Energy equities were the only strong corner of our feed: XLE, the energy fund, rose 2.17% to $65.93, Chevron (CVX) 2.64% and Exxon Mobil (XOM) 2.57%. Our movers feed had Transocean up 8.70% to $5.93 on 68.8 million shares, the heaviest volume in that list.

The usual hedges did little. GLD, the gold fund, rose 0.33%, and TLT, the long-bond fund, fell 0.27%. There was no flight to safety on Tuesday — money went to the thing benefiting from the shock, not to the thing that protects against it.

The weakest corner was the consumer, hours before retail sales

XLY, the consumer discretionary fund, fell 1.75% to $110.88, and every consumer name in our feed finished lower: Starbucks (SBUX) down 2.51%, Nike (NKE) 2.24%, Amazon (AMZN) 2.02%, Disney (DIS) 2.00%, McDonald’s (MCD) 1.83%, Home Depot (HD) 1.73%, Uber (UBER) 1.65% and Airbnb (ABNB) 1.37%. Not one exception.

That is the cleanest signal in Tuesday’s tape, and it is worth holding next to the calendar. Gasoline is the most visible price in a household budget, mortgage rates track the 10-year, and both moved against the consumer this week. The August retail sales report at 8:30 a.m. ET is a direct read on whether any of that has shown up in spending yet — five and a half hours before the Fed says what it makes of the same question.

Coinbase fell 10.10% when a Senate vote failed

Coinbase (COIN) dropped 10.10% to $172.11, the worst performer in our feed, on 18.7 million shares. It opened at $183.62 and traded as low as $168.07. The cause was procedural: the Senate’s cloture vote on the Digital Asset Market Clarity Act, which needed 60 votes to advance, failed as the tally came in. Bitcoin fell as low as $75,000 before recovering some ground, and crypto-linked equities went with it. Robinhood (HOOD) fell 3.39% to $110.45, touching $105.86 intraday. Block (SQ) lost 1.48%.

This is a useful case of a stock moving on legislative process rather than on business results. Nothing changed at Coinbase on Tuesday. What changed is that the bill meant to settle how tokens are classified did not get to a floor vote, so the regulatory uncertainty the company has been carrying stays where it was.

Overnight: Asia flat, futures higher, oil easing

Asian equities were broadly steady ahead of the decision, with the MSCI Asia index up 0.1%, according to Saxo Bank’s Wednesday morning note. Japan’s Nikkei 225 was down 0.07% at 63,415.20 after closing Tuesday at 63,484.10, and South Korea’s Kospi was up 0.10% at 6,634.09. Hong Kong’s Hang Seng had fallen 1.0% on Tuesday to 24,667.24, its lowest close since July 17, led by HSBC down 3.2% and CATL down 6.0%.

US futures edged higher overnight. Saxo’s note had WTI at $105.12, down 0.67%, and Brent at $108.08, down 0.62% — giving back a little of Tuesday’s jump — with the 10-year yield at 4.99% and gold at $4,283.48, down 0.20%. The dollar was modestly firmer into the decision.

On the Fed itself, the range moves to 3.75%–4.00% on a quarter-point hike and stays at 3.50%–3.75% on a hold. Worth noting where the odds came from: before the recent shift, futures had priced roughly a 70% chance of no change in September. The repricing happened fast, which is the kind of setup where the statement’s language and the dot plot can matter more than the decision itself.

What to watch today

August retail sales, 8:30 a.m. ET, from the Census Bureau’s advance monthly report.
The EIA Weekly Petroleum Status Report, 10:30 a.m. ET, with WTI near $105.
The FOMC decision and the Summary of Economic Projections, 2:00 p.m. ET. Chair Powell’s press conference follows at 2:30 p.m. ET.
Lennar (LEN) earnings are on today’s calendar — a housing read with the 10-year near 5%.
The 9:30 a.m. ET open for Coinbase and Robinhood, after Tuesday’s drop on the failed Clarity Act vote.
Energy stocks against oil, after XLE rose 2.17% on Tuesday and crude gave back part of the move overnight.
The Bank of Japan’s decision on Friday.

Not financial advice. iTrading Buddy summarizes publicly available market data and news; every figure above is sourced from the reporting available before the US open on the date shown. Verify anything you act on.