US stock futures pointed higher Tuesday morning. The bond market did not agree.

Dow Jones futures rose 0.22% in early New York trading, S&P 500 futures added 0.33%, Nasdaq 100 futures gained 0.64% and Russell 2000 futures climbed 0.47%, according to Benzinga’s premarket tally at 5:38 a.m. ET. The SPDR S&P 500 ETF Trust (SPY) traded 0.37% higher at $766.30, the Invesco QQQ Trust (QQQ) 0.69% higher at $711.21.

Underneath that quiet green screen sits the trade that matters most this week. The CME Group’s FedWatch tool, as reported Tuesday morning, showed markets pricing roughly a 42% probability that the Federal Reserve raises rates at its September meeting. Not holds. Not cuts. Raises. That reading has swung sharply through August — closer to 44% early in the month, nearer a third after the July jobs report — so treat it as a moving target. The direction of travel has been consistent all summer.

Why the Bond Market Is Pricing a Hike, Not a Cut

The repricing has been building all summer. The 2-year Treasury note, the maturity most sensitive to near-term Fed policy, yielded 4.24% early Tuesday, and traded around 4.25% as the session developed. The 10-year note stood at 4.71%, easing from 4.72% at Monday’s close. That leaves the 2s/10s spread near 47 basis points — a steepening yield curve that has widened by roughly 29 basis points since late June, as traders sold long-dated paper while the front end stayed anchored to a Fed that will not ease.

The policy backdrop is unusually hawkish for a committee that has left rates unchanged through the summer. On July 29 the Federal Open Market Committee voted 9–3 to keep the target range at 3.50% to 3.75%. The statement was blunt: «Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy», the FOMC wrote, adding a line that read like a warning shot — «The Committee will deliver price stability.»[Federal Reserve, FOMC statement, July 29, 2026]

The three dissenters — Cleveland’s Beth Hammack, Minneapolis’ Neel Kashkari and Dallas’ Lorie Logan — all wanted a quarter-point increase. It was the first time since September 2016 that three policymakers broke ranks pointing in the same direction. When inflation stays above target for more than five years, the arithmetic of patience starts to fail.

The same statement confirmed the Fed is «continuing its policy of maintaining ample reserves in the banking system» — meaning the balance sheet is not the active lever, unlike the tapering cycles of the past. Rates are doing all the work.

Monday’s Split Close and Tuesday’s Crosscurrents

Monday ended mixed. The Dow closed at 53,417.16, up 0.26%, while the S&P 500 slipped 0.28% to 7,652.86, the Nasdaq Composite fell 0.76% to 25,980.19 and the Russell 2000 lost 0.76% to 2,995.08. Consumer staples, utilities and financials led; energy and information technology carried the losses.

Geopolitics added a second layer overnight. Iran vowed retaliation after Treasury Secretary Scott Bessent expanded sanctions targeting Tehran’s economic lifelines, warning that «no one is above the reach of U.S. sanctions». Crude did not read it as a supply shock: WTI futures fell 1.99% to around $83.32 a barrel. Gold slipped 0.49% to roughly $4,628.38 an ounce, the dollar index was flat near 99.03, and bitcoin rebounded 3.80% to about $79,955.

Three Data Points Before Noon

Tuesday’s calendar is housing-heavy and sentiment-heavy — and every print now doubles as a Fed input.

  • 9:00 a.m. ET — S&P Cotality Case-Shiller home price index for June. Consensus looks for a 0.1% monthly decline and a 1.0% annual gain.
  • 10:00 a.m. ET — New home sales for July, from the Census Bureau.
  • 10:00 a.m. ET — Conference Board consumer confidence for August. July’s reading fell 1.4 points to 90.8, missing the 92.4 forecast.

There is supply to absorb as well. The Treasury runs its 2-year note auction Tuesday, a 5-year note Wednesday and a 7-year note Thursday. Weak demand at the short end would validate the hike pricing fast, which is why anyone holding bonds should watch the bid-to-cover ratios rather than the headlines.

Not everyone is bearish. Strategist Ed Yardeni reiterated his call for the S&P 500 to reach 8,250 by year-end, arguing the rally is powered by what he calls «Fabulous Earnings Momentum» rather than speculation. That thesis gets a live test in 48 hours.

What to Watch for the Open

  • The 2-year yield at 4.24%. A move above 4.30% would push September hike odds toward a coin flip and pressure rate-sensitive equities — small caps and regional banks first.
  • Consumer confidence at 10:00 a.m. ET. A second straight miss below 90 complicates the hawkish case by pointing at a softening consumer.
  • The 2-year auction. Tail or trim tells you whether real money agrees with the futures market.
  • Nvidia, Wednesday after the close. The single largest earnings event of the quarter, followed Wednesday at 8:30 a.m. ET by the Bureau of Economic Analysis release of July personal income and outlays — the Fed’s preferred inflation gauge.
  • Jackson Hole, August 27–29. Fed Chair Kevin Warsh delivers his first symposium keynote Friday morning, August 28. The theme is «Financial Innovation: Implications for Payments and Policy», but the market will listen for one thing only: whether September is live.

Zoom Communications reports after Tuesday’s close, with analysts modeling $1.48 per share on $1.27 billion in revenue. The setup for the session is simple. Equities want to drift higher on Nvidia anticipation. The front end of the curve is telling them not to get comfortable.