The 10-year Treasury yield finished Friday near 4.98%, a level it last held in 2023, according to Treasury constant-maturity data.
Stocks rallied 0.86% into that number anyway. A three-year high in the long end and a broad equity bid is what the Fed walks into Tuesday morning.
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August core CPI rose 0.3% for the month, a tenth above the Dow Jones consensus, the Bureau of Labor Statistics reported Friday. Headline inflation held at 3.4% year over year.
Futures moved to roughly a 90% chance of a hike Wednesday, up from about 70% before the release. The 2-year closed at 4.63%, the 30-year at 5.36%.
The annual core rate actually slipped to 2.4%, its lowest reading since 2021. The monthly figure moved the odds, not the annual one.
The S&P 500 closed at 7,656.98, up 0.86% and snapping a four-day losing streak. The Dow added 0.98% to 52,573.29 and the Nasdaq rose 0.96% to 26,333.04.
The VIX dropped 11.2% to 15.84. That is a volatility crush executed with the 10-year sitting a whisker under 5%, which leaves Wednesday's projections, not the statement, in charge of the rest of the week.
The week still closed red. The S&P fell 0.8% and the Dow fell 1.6%.
WTI settled at $100.13, down 2.3% on the day. Crude finished higher for a second straight week after Saudi Arabia shut its East-West pipeline following attacks in the Riyadh and Madinah regions.
That supply disruption is the reason headline inflation runs a full point above core. Friday's pullback in crude is the one input that argues against the 3.4% print persisting, and it came far too late to touch August data.
The University of Michigan's sentiment index missed at 47.8. Its one-year inflation expectations reading came in at 4.6%, above forecast.
Expectations at that level speak to whether a $100 barrel is reaching household behavior. That question carries more weight with the committee than the soft 2.4% core reading does.
No major U.S. economic data is scheduled today, and the Fed remains in its pre-meeting blackout. Positioning ahead of Wednesday is the session.
The FOMC's two-day meeting opens Tuesday. The September Empire State manufacturing index arrives the same morning at 8:30 a.m. ET.
Wednesday stacks August retail sales at 8:30 a.m. against the rate decision at 2:00 p.m. Updated projections land with the statement, and Chair Warsh takes questions at 2:30.
