Fed rate hike odds hit 60% as Wall Street stalls
Published on September 1, 2026
Wall Street has stopped waiting for a cut and started bracing for the opposite. Since Kevin Warsh spoke at Jackson Hole, the market implied odds of a Fed rate hike on September 16 have climbed from roughly 35% to 60%. US indexes opened the week on the back foot, and Tuesday's two data points will show whether traders have this right.
US indexes stall after a strong August
The S&P 500 slipped 0.33% on Monday to close at 7,681.56, per Trading Economics. The Dow shed close to 374 points, or 0.70%, while the Nasdaq Composite held its loss to 0.12%, according to The Motley Fool. Nine of the eleven S&P sectors finished lower.
The monthly scoreboard still looks good. The S&P 500 gained 2.6% in August and the Dow booked a fifth straight winning month, CNBC reported. Ryan Detrick, chief market strategist at Carson Group, told Benzinga that September is the weakest month of the year on average, yet a green August paired with a year to date gain of 10% to 17.5% has historically produced a September averaging 1.0%. He puts the first real S&P 500 support at 7,610, the June 2 peak.
Futures steadied on Tuesday morning. S&P 500 futures added 0.07%, the Dow 0.10%, and Nasdaq 100 futures eased 0.01%, Investing.com data shows. Japan's Nikkei closed 0.2% lower at 66,185.
What flipped the Fed rate hike bets
Two shocks in four days did the work. Warsh used his Friday speech to call inflation still too high and to say the central bank has more to do. Odds of a September 16 move jumped from 35% to 60% straight after, Investing.com noted. It would be the first increase since 2023.
The weekend added fuel. US strikes on Iranian rocket launchers near the Strait of Hormuz sent crude flying. Brent trades at $91.07 on Tuesday and is up 8.7% over a month, with WTI near $87, Trading Economics figures show. Costlier energy feeds inflation, which is exactly the case Warsh laid out. The VIX pushed back up to 15.38 and the 10 year Treasury yield sits at 4.75%, Charles Schwab reported. In Europe on Monday the Stoxx 600 lost 0.1% and the DAX 0.5%, while the CAC 40 edged up 0.1%.
Dollar firms, gold and crypto take the hit
The greenback is the clean winner here. The euro trades above 1.1600 and the yen briefly slid past 160 per dollar, FXStreet reported. Gold is the mirror image. Bullion hovers around $4,450 an ounce after losing more than 4% late last week, capped by its 200 day moving average. Crypto followed, with bitcoin near $78,000 and ether close to $2,450.
Key levels today
| Instrument | Level (support / resistance) | Change (Monday session) | Scenario to watch |
|---|---|---|---|
| S&P 500 | Support 7,650 then 7,610, resistance 7,790 to 7,800 | -0.33% | Below 7,610 the index loses the June peak that now acts as its floor. Above 7,790 the August record comes back into play |
| Gold (XAU/USD) | Support 4,400 then 4,310, resistance 4,528 (200 day moving average) | -0.64% (futures) | While gold stays under 4,528 the rate hike camp keeps control. A move back above would say the dollar is tiring |
Economic calendar
Tuesday September 1, 10:00 am ET. August ISM manufacturing index, consensus 55.2 after 55.6. A print above 56 strengthens the hike case and keeps indexes pinned. Below 54 gives stocks room to breathe.
Tuesday September 1, 10:00 am ET. July JOLTS survey, consensus 7.33 million openings after 7.359 million. Anything under 7.2 million would remind traders that hiring is cooling and soften the hike bets.
Wednesday September 2, 8:15 am ET. ADP private payrolls for August, followed by the Fed Beige Book at 2:00 pm.
Friday September 4, 8:30 am ET. August jobs report. July destroyed 23,000 positions against expectations of 85,000. Barclays looks for roughly 25,000 gains and unemployment steady at 4.1%. A second negative month would make a hike very hard to defend.
The bottom line
Markets now price a 60% chance of a Fed rate hike on September 16, and oil at $91 hands that camp another argument. US indexes are still holding their supports, but Tuesday's ISM and Friday's payrolls will settle the question.
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This is not investment advice. Informational content only.