Wall Street closed out the week with a broad rally. The S&P 500 added 0.86% to 7,656.98 on Friday, the Nasdaq Composite gained 0.96% to 26,333.04, and the Dow Jones Industrial Average jumped 509.19 points, or 0.98%, to 52,573.29, according to preliminary closing data.

The relief rally followed the last major inflation reading before the Federal Reserve’s meeting next week. The Bureau of Labor Statistics reported that the August Consumer Price Index rose 0.4% for the month and 3.4% from a year earlier, matching July’s pace and matching Wall Street’s forecast. Core inflation, which strips out food and energy, rose 0.3% on the month and eased to 2.4% year-over-year from 2.5% in July — also in line with estimates. Investors took the absence of a surprise as good news, even though the report did little to settle the debate over what the Fed will do next.

A Fed Decision That Could Go Either Way

The Federal Open Market Committee meets Tuesday and Wednesday, with the rate decision due at 2:00 p.m. ET on September 16. Policymakers have held the federal funds rate at 3.50%-3.75% since voting 9-3 in July “to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent”, and a quarter-point hike would push it to 3.75%-4.00%.

Traders now price in roughly 70% odds of that hike, according to CME FedWatch data — up from close to a coin flip just a few weeks ago, though little changed by Friday’s in-line CPI print. The case for tighter policy has built steadily since the three scenarios Fed Chair Kevin Warsh sketched out at Jackson Hole, where he signaled inflation remained too high to ignore even as other officials pushed back. The committee’s own July minutes showed a Fed already split between members worried about sticky prices and those wary of tightening into a cooling labor market — a split this month’s data has not resolved.

That labor-market question matters because the case for a hike got easier after payrolls jumped 162,000 in August, nearly tripling forecasts and easing fears that tighter policy would hit an already-softening jobs market.

Bonds Are Telling a Different Story

If stocks read Friday’s data as reassuring, the bond market did not. The 10-year Treasury yield closed at 4.96%, its highest level in years and within striking distance of 5%, as part of a broader global bond selloff rather than a US-specific move. It is a continuation of the climb flagged earlier this week, when yields first broke above 4.85%. Higher long-term yields tighten financial conditions on their own, regardless of what the Fed decides Wednesday, and they have been a persistent headwind for high-multiple technology stocks all summer.

A Packed Calendar Before the Decision

The rate call is not the only data point this week. Tuesday brings both the Commerce Department’s retail sales report for August and the Fed’s own industrial production figures, at 8:30 a.m. and 9:15 a.m. ET respectively — hours before the FOMC gavels in for its second day. Housing starts for August follow Wednesday morning, just ahead of the 2:00 p.m. rate decision itself.

  • Retail sales, Tuesday 8:30 a.m. ET: a strong consumer reading would reinforce the case for a hike; a soft one hands the doves fresh ammunition hours before the meeting even opens.
  • Industrial production, Tuesday 9:15 a.m. ET: a read on whether factories are absorbing higher energy costs and borrowing rates.
  • Housing starts, Wednesday 8:30 a.m. ET: the housing sector is typically the first to feel higher long-term rates, making this an early tell on how much damage a 5% 10-year yield is doing.
  • The rate decision, Wednesday 2:00 p.m. ET: markets are pricing a hike as more likely than not, so a hold would probably move markets more than a hike would.

Oil Pulls Back, But Not by Much

Energy markets offered a partial counterweight to the inflation debate. Brent crude fell 2.98% to $104.42 a barrel Friday and US benchmark crude dropped 2.43% to $99.99, as diplomatic efforts around the Strait of Hormuz and forecasts for higher US crude production eased some of the supply anxiety that had driven prices higher earlier in the month. Both benchmarks remain well above where they started the summer, and a renewed move higher would keep the inflation argument alive for policymakers leaning toward a hike.

What to Watch for the Open

  • Whether Friday’s rally holds: a relief rally on in-line data is fragile if Tuesday’s retail sales or industrial production numbers surprise in either direction.
  • The 10-year yield’s path to 5%: a close above that level would be the clearest signal yet that financial conditions are tightening regardless of what the Fed does.
  • Positioning into Wednesday: with odds near 70% for a hike, a hold would be the bigger surprise — and likely the bigger market mover.

*Market data as of Friday’s close, September 11, 2026, and preliminary reporting into the weekend. Levels may be revised in final settlement data. This article is information, not investment advice.*