U.S. Stocks Rebound as Market Confirms Fed Rate Hike Expectations, 10-Year Treasury Yield Approaches 5%

On September 12, the U.S. August CPI data came in slightly above expectations, confirming that the Federal Reserve is likely to raise interest rates next week, which propelled U.S. stocks to rebound on Friday. The S&P 500 index rose by 0.9%, the Dow Jones increased by about 1%, and the Nasdaq climbed by 1%, although all three major indices still experienced an overall decline this week. The yield on the 10-year U.S. Treasury closed at 4.974%, nearing the 5% mark, a significant increase from 4.783% a week earlier. The market anticipates that the Fed will raise rates by 25 basis points at next week's meeting, with RBC Capital Markets adjusting its expectations for rate cuts this year to three hikes, suggesting that high rates may further suppress corporate earnings and stock valuations. The energy market continues to exert pressure, with Brent crude oil closing at $104.61 per barrel on Friday, up over 8% for the week. Attacks by Houthi forces on Saudi energy facilities, transportation risks in the Strait of Hormuz, and Saudi Arabia's closure of east-west oil pipelines have heightened supply concerns. Despite a recovery in market sentiment on Friday, the coexistence of high oil prices and high interest rates suggests that U.S. stocks may maintain high volatility moving forward. The core issue on Wall Street has shifted to the duration of high interest rates and their impact on inflation and the economy.