S&P 500
7,650.50
+0.17% Fri
−0.08% week · −2.13% vs ATH
The Fed hiked, told you more are coming, and the Nasdaq closed the week green anyway. The 2-year disagreed — and the curve is now the flattest it has been all cycle.
Light data week · UNGA is the catalyst§1 — The tape
Friday was triple witching — roughly $7 trillion in options expiring — and the indexes barely moved. Technology (+0.87%) and industrials (+0.47%) were the only green sectors. That is a quiet end to a week that contained the first Fed hike since 2023.
§2 — The divergence
This is the fact that should stop you. In the week the Federal Reserve raised rates for the first time in three years and projected more, the Nasdaq rose and the Dow lost 1.69%.
Week of Sept 14–18, measured from the Sept 11 close.
Long-duration growth outperforming in a hiking week is backwards on the textbook. Two things explain it. Semiconductors ripped roughly 3% on Thursday as the AI-safety scare from the previous week faded and chip-demand optimism returned. And the Dow's weakness is concentrated in the cyclical, rate-sensitive, consumer-facing names that a 4% funds rate actually damages.
Put differently: the market did not rally on the Fed. It rotated — out of the economy and into the one story that has its own demand curve.
§3 — What the Fed actually did
| FOMC, Sept 16 | Outcome |
|---|---|
| Decision | +25bp to 3.75%–4.00% |
| Vote | 12–0, unanimous |
| First hike since | 2023 |
| Want ≥1 more in 2026 | 16 of 19 members |
| Want 2 more by end-2027 | 8 members |
| Median 2026 year-end | 4.1% (was 3.8% in June) |
| 2% inflation reached | pushed to 2029 |
Two lines from Warsh's press conference did the damage. "Inflation is too high and has been for too long." And — more consequential — that financial conditions remain accommodative rather than restrictive, which is a Chair telling you there is room to keep going.
The tape agreed in the moment: an initial pop reversed hard, the S&P fell about 1% to six-week lows near 7,500, and the Dow dropped more than 800 points intraday. Then Thursday and Friday took it all back, with the S&P +1.31% off the FOMC-day close.
Equities recovered. The front end did not. The 2-year closed Friday at 4.756%, another 52-week high, and 2s10s compressed to 24.4bp — down from 38.7bp ten days ago. A bear flattener this persistent is the bond market saying it believes the dots. Equities are pricing one hike and done; the curve is pricing the sequence.
§4 — The unwind
The input that caused this entire month has reversed, and it happened without a headline as loud as the one that started it.
Satellite tracking showed Saudi crude exports through the Strait of Hormuz surging to roughly 2.8 million barrels a day, against about 700,000 in August. Aramco expects to restore around half the shut East–West pipeline's daily flows. Three consecutive down sessions followed.
Layered on top: diplomacy. The US granted visas to senior Iranian officials for the UN General Assembly, Qatar confirms messages are moving between Washington and Tehran, and Trump has said he would "probably" be open to meeting President Pezeshkian in New York.
Every bearish thesis of the last three weeks traced back to oil: energy inflation → rate repricing → 5% ten-year → multiple compression. If the supply premium keeps draining, that chain runs backwards — and the Fed will have hiked into a shock that was already resolving. That is the bull case nobody is writing down, and it is also how policy mistakes get made.
§5 — Levels
Wednesday's brief said the first rally into the broken 350.24 level would tell you whether the break was a flush or a change in trend. It was a flush. AVGO closed Friday at $357.61 (+2.97%) — 2.10% back above the floor it lost on Tuesday, and +5.41% off the Tuesday close.
A level that breaks and is reclaimed within three sessions is a failed breakdown, and those tend to run — the traders positioned short below it have to cover. The test that matters now is 366.78, the high from Sept 11 that has rejected AVGO once already.
| Ticker | Fri close | Fri | Note |
|---|---|---|---|
| AVGO | $357.61 | +2.97% | reclaimed the floor |
| NVDA | $222.27 | +1.34% | near 52wk high $236.54 |
| ORCL | $147.61 | −1.98% | still 55% off its high |
Oracle is now its own story, not an AI-complex story. Broadcom and Nvidia both rallied hard into Friday while Oracle fell again. When a group stops trading together, the name that lags is usually carrying something specific — in ORCL's case, a debt-funded capex programme meeting a 4% funds rate. Stop reading it as a sector proxy.
§6 — The week
PCE is not this week — August personal income and outlays lands Sept 30. So there is no inflation print to move the rate path until the month is nearly over, and the flash PMI on Wednesday is the only real read on activity.
Which leaves the General Assembly as the week's live variable. Trump speaks Tuesday, Pezeshkian Wednesday, and both are in the same city with intermediaries passing messages. Nothing is scheduled between them, and the Iranian delegation is confined to its accommodation and UN headquarters — but a single line from either podium about de-escalation moves crude more than any number on this week's calendar.
You cannot set an alarm for this one. What you can do is know the level in advance: if Brent breaks $100, the energy-inflation thesis that drove the last month is materially damaged, and the names that suffered most under it are the ones with the most to recover. Set the alert on crude, not on the headline.
§7 — Scenarios
Something constructive comes out of New York and the supply premium keeps draining. The 10-year comes off 5%, the curve steepens from a very flat base, and the most rate-damaged names lead: Russell, then the Dow cyclicals. AVGO clears 366.78 on the way.
Confirms: Brent < $100, 10Y < 4.92%, 2s10s widening off 24bp.
No diplomatic breakthrough, no data to reprice anything, and the tape grinds on last week's rotation: chips bid, cyclicals offered, the 2-year pinned near its high. Low volume, level-to-level trade. AVGO holds 350.24 and fails at 366.78.
Confirms: Brent $101–106, 10Y 4.95–5.05%, VIX under 20.
A hostile UNGA exchange puts the supply premium back and Brent retakes $108. Alternatively the flattening simply continues: 2s10s through zero would be the first inversion of this cycle and a much bigger signal than anything equities are pricing.
Confirms: Brent > $108 or 2s10s < 10bp; AVGO back under 350.24.
The last two editions under-weighted the bearish branch and it happened both times. This week I've deliberately not stacked the distribution toward the outcome that would look clever — B at 40% is the boring answer and it is genuinely the most likely one in a week with no scheduled catalyst.
§8 — What to watch
§9 — Scorecard
Best week of the run so far, including the one call that was set up properly in advance.
Badges: Open · Hit · Partial · Miss. Misses stay posted.
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