From Yahoo Finance · Grace O'Donnell · · 3m
Fed hikes rates as stocks sink and bond yields surge
The Federal Reserve raised rates for the first time in three years, sending the Dow down 600 points and pushing the 10-year yield above 5%.
In brief
The Federal Reserve raised rates for the first time in three years, sending the Dow down 600 points and pushing the 10-year yield above 5%. The Fed's first rate hike in three years signals a renewed focus on fighting inflation, even as stocks fall and bond yields hit levels not seen since 2007. Originally reported by…
Fed hikes rates, stocks tumble
The Federal Reserve raised rates by 25 basis points to 3.75%-4%. The Dow fell 600 points while the S&P 500 dropped 0.4%.
Bond yields top 5%
The 10-year Treasury yield rose above 5%, reaching its highest level since the 2007 financial crisis.
More rate hikes coming
The Fed's projections showed officials expect at least one more rate hike in 2026. The decision was unanimous.
Oil prices stay elevated
Benchmark Brent and WTI crude futures remained above $100 per barrel, fueling worries about persistent inflation.
Retail sales beat expectations
August retail sales rose 1.2%, topping the 0.9% forecast. Consumers kept spending despite inflation pressures.
Warsh focuses on inflation fight
Fed Chair Kevin Warsh said inflation remains the central bank's main concern, calling it "too high and has been for too long."
“The plain fact is that inflation is too high and has been for too long.”
Warsh dodges Trump questions
Warsh refused to comment on Fed independence or President Trump's calls for lower rates, saying "We stay in our lane."
“We stay in our lane. We'll let people that do trade policy and fiscal policy stay in their lane too.”
Rate hikes help poorest Americans
Warsh argued that price stability benefits workers without assets, allowing them to "put their head above water" with real wage gains.
Markets initially rallied, then sank
Stocks rose briefly after the rate decision, but reversed sharply during Warsh's press conference as traders saw hawkish signals.
SpaceX stock jumps on launch
SpaceX shares popped 5% after announcing its first orbital Starship launch for September 22, trading at $151.
AI infrastructure trade stays hot
Bank of America says AI infrastructure investments remain strong, with memory, power, and interconnectivity creating supply bottlenecks.
Chip stocks rebound on deal
SK Hynix and Intel shares rose on reports the Korean chipmaker is exploring a deal to produce memory wafers in the US.
US oil output hits records
American crude and natural gas production are both set to reach all-time highs as producers capitalize on global supply shortages.
Software stocks outpace chips
The software ETF is up 15% over three months while the semiconductor ETF fell 17%, as investors rotate back to software.
“One of the things that was greatly overstated earlier this year was the death of software.”
Rate hikes create buying opportunities
Historically, the S&P 500 drops 4% after the first Fed hike, then recovers and gains 9% on average over 12 months.
“Fed rate hikes have historically been great buying opportunities.”
Crypto tumbles on failed vote
Bitcoin fell below $76,000 after the Senate voted 49-50 to block the Clarity Act, stalling crypto regulation progress.
The bottom line
The Fed's first rate hike in three years signals a renewed focus on fighting inflation, even as stocks fall and bond yields hit levels not seen since 2007.
