The holiday-shortened week went the way the September 7 post said it would, only faster. August CPI printed 3.4% year over year with core at 2.4%, but the monthly numbers were the story: headline up 0.4% and core up 0.3%, a tenth above forecast, with gasoline up 3.9% in a single month. August PPI was worse at 5.4%. Fed funds futures moved from a coin flip to roughly 86% odds of a hike on Wednesday. The 10-year touched 4.99% on Friday, its highest since October 2023, and the 30-year sat near 5.36%.
Equities absorbed it with a four-day losing streak that ended Friday. The S&P 500 finished the week down 0.8% at 7,657, the Dow lost 1.6%, the Nasdaq 0.7%, and the Russell 2000 2.4%. Brent crude rose 8.7% on the week, spent Thursday above $108 after drone strikes shut Saudi Arabia's East-West pipeline, the route carrying roughly five million barrels a day around Hormuz, and settled near $104.60 on word that Iran would meet the Gulf states in Oman.
Scorecard: September 7
The playbook said favor what survives a hike and lighten what led August. Grading the levels table:
- Hike probability 55% to 65%, expected to rise. Right. It is 86% this morning.
- Core CPI above 2.6% makes a hike the base case. Wrong on the threshold, right on the conclusion. Core came in at 2.4% year over year, but the 0.3% monthly print and the PPI did the work anyway. The lesson is that the Fed is reading the monthly run rate, not the annual figure.
- 10-year above 4.80% pressures megacaps. Right. It reached 4.99% and the megacaps led the four-day slide.
- 30-year above 5.30% restarts the long-bond rout. Right. 5.36% on Friday.
- S&P first support at 7,600. Held, barely. Thursday's close was 7,592 and Friday recovered to 7,657.
- Micron support at $950. Never tested. Micron and Sandisk rallied on Wednesday after Goldman called the end of the summer downtrend, with DRAM contract pricing seen up 50% quarter over quarter.
- Apple's pricing as the memory-cost tell. Confirmed. The iPhone 18 Pro starts $100 higher at $1,199, higher storage tiers are up $300 to $500, and the first foldable starts at $1,999. Bank of America cut its 2027 earnings estimate on component costs the next day.
One call from June deserves a correction. On June 8 I wrote that Oracle would not be forgiven for a beat if it announced more capital raising. Thursday's quarter had capex of $28.5 billion, free cash flow of negative $5 billion, and a full-year capex guide of $90 to $95 billion. The stock rose 6%. The market forgave it because remaining performance obligations hit $664 billion and cloud infrastructure revenue more than doubled. The rule from July, that capex is punished unless growth is extraordinary, still holds. Oracle's growth is extraordinary. I underweighted that in June.
Wednesday: The Hike Is the Easy Part
The decision is priced. What is not priced is the shape of the committee and the dots. In July three officials dissented in favor of a hike. If Wednesday's vote is 12 to 0, the doves have conceded and the market should read the hike as the first of a series. If there are dissents against the hike, the cycle looks shorter and the long end can rally.
The June dot plot had a 2026 median of 3.8%. A hike to 3.75% to 4.00% plus a median at 4.1% or higher would say the committee expects at least one more this year. Chair Warsh has refused to give forward guidance and said the summer's readings did not show underlying improvement. Nothing since Jackson Hole has changed that, and this morning's 10-year at 4.97% is the bond market agreeing with him.
The equity risk is not the hike. It is a 10-year through 5% during the press conference. That level has not printed since 2007, and the long-duration megacaps that recovered in August have not been tested against it. The S&P held 7,600 on Thursday. If 5% breaks on Wednesday, the next test is 7,500.
The AI Trade Has a New Kind of Headline Risk
On Saturday Anthropic's chief executive published an essay calling for a coordinated slowdown at the frontier, cosigned by the heads of OpenAI, Google DeepMind, and xAI. On Sunday Bloomberg reported Anthropic has chosen Nasdaq for an IPO it hopes to complete in October at a valuation near $965 billion. Both are landing on a chip complex that had only just broken its summer downtrend.
The slowdown essay is a sentiment event, not a demand event. No hyperscaler has cut a capex number, Oracle just guided $90 billion of it, and a coordinated pace at the frontier does not reduce the compute required to serve the models that already exist. But the market's reflex since June has been to sell chips first and read later, and a Monday gap lower in Nvidia would fit that pattern. Nvidia closed Friday at $218, above the $205 that the August 24 model used, and the buy rating stands. The IPO is the bigger long-term story: a $965 billion listing in October is a large new claim on the same pool of AI capital that absorbed SpaceX in June, and I wrote then that supply of paper gets resolved with lower prices for the marginal asset.
The Rest of the Week
- Tuesday: CLARITY Act cloture vote. The crypto market-structure bill needs 60 votes and has not had them all summer. Failure is the base case. Bitcoin closed the week near $77,000 after peaking at $79,890 on Saturday, and it has been trading as a liquidity asset into a hiking Fed. A failed vote plus a hike is the worst-case week for it. The invalidation is unchanged at a weekly close below $55,000, a long way down.
- Wednesday: August retail sales, hours before the Fed. July was minus 0.6%. Pre-tariff auto buying and gasoline prices should produce a large rebound, which is another reason the committee will not sound relieved.
- Wednesday: Lennar. With mortgage rates pinned by a 5% 10-year, the builder is the clearest read on how much the rate shock has reached the consumer. Expect margins and orders down.
- Friday: triple witching. Roughly $7 trillion of options notional expires, among the largest on record. Expect noise, not signal.
Key Levels for Fed Week
| Fed decision | Hike 25 bp to 3.75% to 4.00%; vote not unanimous |
| End-2026 median dot | At or above 4.1% |
| 10-year yield on the decision | Prints above 5.00% |
| S&P 500, support that must hold | 7,500 |
| August retail sales | Above +0.5% |
| Bitcoin through the CLARITY vote and the hike | Holds $72,000 |
| Brent by Friday, on the Saudi pipeline restart | Below $105 |
My Take
The hike is priced, the dots and the vote are not, and the 10-year is one hawkish press conference from 5%. The September 7 playbook of memory, banks, and short Treasuries over long-duration megacaps is intact, with the added lesson that extraordinary growth still buys forgiveness for capex, as Oracle just showed.
Playbook: hold the hike-proof mix through Wednesday; treat a 10-year above 5% as the trigger to lighten megacaps further and the 7,500 level as the line for the index; buy a chip gap lower on the slowdown essay, since nobody has cut a capex number; stay patient on Bitcoin through a bad week for it.