Week of Sep. 14: The Fed Hikes, Yields Hit 5%

U.S. stocks split in the week the Federal Reserve raised interest rates for the first time in three years. The Dow Jones Industrial Average posted a third straight weekly loss, the S&P 500 ended barely lower, and the Nasdaq Composite was the only major average to finish higher. The 10-year Treasury yield closed just above 5%, and U.S. crude settled above $100 a barrel, so the week's real story was not the averages but which parts of the market can carry a higher cost of capital. 12

The Dow's weekly decline was its largest since March. Friday itself was almost flat in both directions: the Dow shed 95.40 points, the S&P 500 added 12.74 and the Nasdaq gained 104.25. 2

The 10-year Treasury yield ended Friday at 5.006%, having crossed 5% earlier in the week, and the 30-year stood at 5.333%. 1 West Texas Intermediate crude settled at $100.30 a barrel on Friday, down 1.58%, and Brent at $103.87, leaving crude roughly unchanged for the week but above the $100 line. 1

Financials carried the week's damage. The SPDR Financials sector fund fell more than 2% for the week, its worst since March, and Goldman Sachs and Bank of America each lost about 8%, their biggest weekly drops since April 2025. 1

Technology moved the other way, after a detour. Chip stocks sold off on Monday, September 14, after Anthropic chief executive Dario Amodei published an essay calling for the industry to slow the pace of AI model development, with OpenAI and xAI endorsing the call. The Philadelphia semiconductor index fell 6% that day, with Nvidia down 3.5%, Micron down 6.7%, Lam Research down 8% and Applied Materials down 7%. 3

By Friday the group had recovered: Applied Materials rose 4%, Lam Research 5%, and the Philadelphia chip index finished the week slightly higher. Cybersecurity shares held their gains, with CrowdStrike up about 14% since Monday. 1

Two single names made their own news on Friday. Warren Buffett stepped down as chairman of Berkshire Hathaway and became chairman emeritus, with his son Howard taking the chair; the shares edged lower. 2 Bitcoin rose about 6% to top $81,000 after the Securities and Exchange Commission cleared a regulatory path for tokenized versions of listed U.S. stocks, lifting Coinbase, Strategy and Robinhood by between 9.1% and 16.4% on Friday. 24

The Federal Open Market Committee voted 12–0 to raise the target range for the federal funds rate by a quarter point, to 3.75%–4%, effective September 17. It was the first increase since July 2023 and the first policy change under Chair Kevin Warsh. 5

The statement said economic activity is "expanding at a solid pace," that inflation "remains elevated," and that the action "will support a timelier return to the Committee's 2 percent goal." The projections released with the decision raised the median year-end 2026 rate to 4.1%, from 3.8% in June, implying one more quarter-point increase this year; the longer-run rate was marked up to 3.25%. 56

Market pricing moved with it. CME FedWatch put the probability of another hike at the October 27–28 meeting at 55.4% late Friday, up from 42.5% a week earlier and 7.2% a month before. 27

Retail sales rose 1.2% in August to $773.9 billion, above the 0.8% economists expected, and the July change was revised to −0.5%. Sales at gasoline stations rose 3.1% as pump prices climbed. 8

Housing weakened. Overall housing starts fell 2.6% to a 1.275 million annual rate, single-family starts rose 7.6% while multifamily starts fell 22.5%, and building permits dropped 2.7% to 1.394 million. Homebuilder sentiment fell to a one-year low and the 30-year fixed mortgage rate reached 6.76%, its highest in more than a year. 69

Industrial production was unchanged in August after a 0.2% gain in July, manufacturing output fell 0.3% — its first decline after seven consecutive monthly increases — and capacity utilization held at 76.3%. 10

Consumer sentiment slipped to a preliminary September reading of 47.8 from 51.7 in August, with year-ahead inflation expectations at 4.6% and the five-year measure at 3.4%. 11

The rate path is the first question. The Fed's next meeting is October 27–28, and futures now assign roughly even odds to another quarter-point increase there. 712

The data calendar is light: S&P Global's flash surveys for September on Wednesday, jobless claims and August new home sales on Thursday, and August durable goods orders plus the final September consumer sentiment reading on Friday. 612

Federal Reserve officials speak repeatedly, which matters because Chair Warsh has declined to give forward guidance. 12

The widest-reaching event is political. President Xi Jinping is expected in Washington, with a meeting with President Trump expected Thursday and AI, semiconductor restrictions and the currency on the agenda; the two sides have also been discussing tariff cuts on U.S. LNG ahead of the visit. 12

The frame to carry into next week is the one the Fed set: a policy rate around 4%, a 10-year at 5% and oil above $100. Each is manageable alone; the question is what they do to earnings together, and that shows up in sector lines before it shows up in the averages.