The S&P 500 slipped Monday as traders priced in higher odds of a Federal Reserve rate hike and oil prices climbed on Middle East supply fears, though the index trimmed its losses off the session's worst levels. Goldman Sachs put the odds of a September hike at 85%, while CME's FedWatch tool showed traders pricing a roughly 90% likelihood.
The S&P 500 fell 0.3% on Monday, while the Nasdaq Composite slipped 0.2% and the Dow Jones Industrial Average dropped 98 points, or 0.2%. At the session's lows, the S&P 500 and Nasdaq were down 0.8% and 1.3% respectively, and the Dow declined almost 300 points, or about 0.6%, before all three indexes pared some of the damage.
Indexes claw back from session lows
The pullback came as investors weighed rising Treasury yields and oil prices. Bond markets set the tone. The 10-year Treasury yield climbed to its highest level since October 2023 earlier Monday. It pulled back later in the day, trading down more than 3 basis points at 4.944%.
Goldman Sachs sees an 85% chance of a hike
The Federal Reserve gathers this week for its September policy meeting, and traders are leaning toward tighter policy. CME's FedWatch tool showed fed funds futures pricing in a roughly 90% likelihood of a rate hike, while Goldman Sachs projected an 85% probability that the Fed will raise rates by 25 basis points at the meeting.
The Federal Open Market Committee meets September 15-16, 2026, with the effective federal funds rate at 3.63%, inside the Fed's 3.50%-3.75% target range. A hike would move the target range to 3.75% to 4.00%.
Not everyone welcomes the prospect. According to Crypto Briefing, market analyst Albert Edwards called a hike "criminally stupid."
Oil adds to the pressure
Oil prices also weighed on sentiment after Saudi Arabia shuttered a key pipeline that bypasses the Strait of Hormuz. West Texas Intermediate crude rose nearly 1% to above $100 a barrel, while Brent crude gained almost 1% to above $105.
U.S. crude broke above $100 a barrel last week for the first time since May as the conflict in the Middle East escalated, a rally that dragged on the three major averages. The Dow posted its biggest weekly loss since March as a result.
Sources: CNBC, Crypto Briefing
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