The hike is done. The market rallied. Oil pulled back to $104 after Saudi Arabia said its pipeline would be restored. The 10-year yield fell for the first time in nine sessions. Chips surged 3%. This was the biggest up day in two weeks. But the dot plot still says December.
The Close
Relief. The S&P 500 jumped 1.1% to 7,635. The Nasdaq surged 1.7% to 26,420 — tech stocks led the recovery. The Dow gained 0.6% to 51,770, held back by the financial names that got crushed yesterday. Chip stocks climbed 3% as a group. This was the first green day for all three indexes in a week.
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| S&P 500 | 7,635 | +1.1% | ||
| Nasdaq | 26,420 | +1.7% | ||
| Brent Crude | $104 | −3.7% | ||
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| Info. Technology | +2.0% | |||
| Comm. Services | +1.5% | |||
| Consumer Disc. | +1.2% | |||
| Materials | +1.0% | |||
| Industrials | +0.8% | |||
| Health Care | +0.5% | |||
| Utilities | +0.3% | |||
| Real Estate | +0.2% | |||
| Consumer Staples | +0.1% | |||
| Financials | −0.3% | |||
| Energy | −1.0% | |||
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The catalyst was oil. U.S. Energy Secretary Chris Wright said Saudi Arabia's East-West pipeline — shut since last week's drone strike — would be restored soon. The pipeline moves up to 4 million barrels a day of crude from the Persian Gulf to the port of Yanbu. Brent fell to about $104, down from its $108 peak this week. When the supply that spooked the market starts coming back, the pressure releases fast.
Micron gained 5% after Intel CEO Lip-Bu Tan said at an industry event that memory chip demand isn't slowing down and prices would continue to rise. That was enough to pull the entire semiconductor sector higher. The AI slowdown call from last week spooked hardware stocks for two days. Thursday's action suggests the market has decided the hardware companies are fine — the slowdown, if it comes, will hit the model builders more than the chip makers.
Generac surged 33% after Amazon announced warrants to buy $340 million in the company's stock as part of a deal for Generac to supply backup power generators to Amazon's data centers. When the largest cloud company in the world locks in a power supplier with a $340 million commitment, it tells you how seriously Big Tech takes the electricity problem.
The 10-year yield fell for the first time in nine sessions — snapping the longest rising streak since early 2024. It pulled back from just above 5% to below 4.95%. That's the bond market saying: the hike landed, it was expected, and the near-term inflation path is priced. The Bank of England held its rate at 3.75%, offering a counterpoint — Europe is pausing while America tightens.
What The Market Is Pricing In
The S&P 500 gained 1.1% the day after the Fed raised rates for the first time in three years. On the surface, that looks like the market is fine with the hike. It's not that simple.
Here's what happened in the last 24 hours. At 2:00 p.m. yesterday, the market was up 0.4%. At 2:30, Warsh said inflation has been too high for too long. By 4:00, the S&P was down 0.5% — a full percentage point swing in ninety minutes. Then overnight, oil fell on the Saudi pipeline news and futures turned green. By this morning, the market had recovered everything it lost in Warsh's press conference and added another half a percent on top.
That tells you two things. First, the hike was priced in. The market barely moved on the rate itself — it was Warsh's tone that caused the selloff, and a single piece of good news on oil erased it. Second, oil is the variable that matters more than the Fed right now. When oil falls, stocks rally. When oil rises, stocks sell. The Fed set the rate. The Strait of Hormuz sets the mood.
The dot plot still shows December. Most committee members projected two total hikes this year. Goldman expects the second one in two and a half months. Today's rally was relief, not a reset. The market isn't pricing in the end of the cycle — it's pricing in a pause until the next move. If oil stays near $104 and the pipeline comes back, the December hike may be delayed. If oil pushes back above $108 and the Strait stays tight, December is locked.
Analysts are already resetting their targets. Yardeni Research slashed its year-end S&P 500 forecast from 8,400 to 7,900 — still 4% above yesterday's close, but a far cry from the bullish view they had a month ago. The phrase everyone is using is "the risks of a downturn have increased over the next three to six months."
In November 1994, the day after the Fed's final rate hike of that cycle, nobody knew it was the last one. The market rallied and then went on a five-year bull run. Of course, it didn't feel like the start of a bull run at the time — it felt like a relief bounce. Just like today. The difference is that in 1994, oil wasn't $104 and the 10-year wasn't at 5%. This time, the market needs more than a pause to sustain the rally. It needs oil to come down and stay down.
What's Next
Three things I'm watching this week:
01 — Oil and the Saudi pipeline through the weekend
Energy Secretary Wright said the pipeline would be restored "soon." Soon is not now. Every day it stays offline, Yanbu's storage draws down. If "soon" means Monday, Brent drops below $100 and the S&P opens next week higher. If it means next month, $108 oil comes back and so does the selling. The weekend headlines from the Middle East will set the tone for Monday's open.
02 — Friday's positioning
Traders don't like holding risk over a weekend with this much uncertainty. Watch whether today's gains hold through Friday or whether institutions sell the rally to lock in profits before Saturday. If Friday closes above today's level, it tells you the buyers have conviction. If it gives back more than half of Thursday's gains, the relief rally was a dead cat bounce.
03 — The 10-year at 5%
The 10-year yield snapped a nine-session streak today and pulled back below 4.95%. That's the number to watch. If it stays below 5% through next week, it means the bond market has digested the hike and moved on. Stocks can live with a 4.9% ten-year. They cannot live with a 5.1% ten-year. Every time the yield has pushed above 5% this month, equities have sold off the same day. Fed governors Williams and Jefferson both speak Tuesday. If they echo Warsh's tone from yesterday, the 10-year goes right back above 5 and the rally stalls. If they soften, the yield drifts lower and the S&P has room to hold this level.
The hike is done. The relief trade is on. But the rally has conditions attached: oil needs to come down, the pipeline needs to reopen, and the next two months of data need to show that inflation has peaked. If all three happen, the S&P holds 7,600 and grinds higher. If any one of them fails, yesterday's selloff comes back.
That's it for today. See you tomorrow after the close.
