Market Update for September 7-11, 2026

Executive Summary

U.S. equities fell in a shortened week. SPY lost 0.8%, QQQ fell 0.6%, and DIA dropped 1.6%. The index losses were manageable. The internals were worse. The equal-weight S&P proxy fell 1.9% and small caps lost 2.4%, while semiconductors and technology finished slightly higher.

Oil drove the repricing. The USO and BNO proxies gained 9.1% and 9.4%. Brent settled above $103 after restricted Gulf flows and attacks around Hormuz and the Red Sea raised the probability of a longer supply disruption. Energy equities gained 1.7% while every other major sector proxy in this review fell or barely moved.

Inflation confirmed that the Federal Reserve cannot ignore the shock. August CPI rose 0.4% month over month and 3.4% year over year. Core CPI rose 0.3%, above the 0.2% consensus. Producer prices rose 0.4% in August and 5.4% from a year earlier. Fed-funds futures moved to roughly 85% odds of a 25 basis point hike on 16 September.

Treasury yields rose sharply. The two-year yield rose 26 basis points to 4.63%, the 10-year rose 18 basis points to 4.96%, and the 30-year rose 11 basis points to 5.35%. TLT fell 1.6%. This is tighter policy and a higher term premium arriving together.

Global equities also weakened. ACWX fell 1.6%, Europe fell 1.9%, emerging markets lost 1.3%, and the China large-cap proxy dropped 3.9%. Japan was the exception, up 0.3%, while the yen proxy gained 1.7% before an expected Bank of Japan rate hike.

Bitcoin fell 3.1%, while ether gained 2.4%. The split shows selective demand inside crypto, but the wider message stayed macro-driven. Higher real yields and more expensive leverage are a poor backdrop for assets whose value sits far in the future.

Corporate data offered a counterweight. Oracle grew cloud infrastructure revenue 121% and added 850 megawatts of data-center capacity in one quarter. Demand grew, but funding remained costly: free cash flow was negative $5 billion and Oracle sold $20 billion of stock during the quarter.

I favor scarce energy and proven AI revenue while inflation keeps policy tight. Broad cyclicals, weak balance sheets, and long-duration assets need lower oil or lower yields. They have neither today.

US Stock Market

The market narrowed as discount rates rose. SPY fell 0.8%, QQQ lost 0.6%, DIA dropped 1.6%, and IWM fell 2.4%. RSP underperformed SPY by 1.1 percentage points. That gap matters because it says the average company absorbed more damage than the headline index showed.

Technology held because AI spending keeps converting into revenue. SMH gained 0.3% and XLK rose 0.2%. Oracle reported Q1 revenue of $19.3 billion, up 30%. Cloud revenue rose 62% to $11.6 billion, led by 121% growth in infrastructure. Remaining performance obligations reached $664 billion after more than $30 billion of new AI cloud contracts.

Capacity delivery is now the edge and the risk. Oracle added 850 megawatts of data-center capacity and delivered more than 300,000 GPUs since the end of Q4. Yet the build consumed cash. Free cash flow was negative $5 billion, and the company completed a $20 billion at-the-market equity sale. Oracle fell 5.4% for the week despite the strong operating result. Investors demanded a higher return to finance that growth.

Adobe told a similar story from the application layer. Revenue reached a record $6.76 billion, up 13%, and AI-first annual recurring revenue grew more than 150%. The shares still fell 5.4% for the week. Apple gained 3.8% after launching the $1,999 iPhone Duo. These moves rewarded visible product and infrastructure demand, while companies with uncertain cash conversion or growth prospects lagged.

My preference: own companies converting scarce compute into current revenue faster than their cost of capital rises. Avoid treating AI backlog as cash. The market is now separating booked demand, delivered capacity, and financed capacity.

Global Markets

The selloff was global because the constraint was global. ACWX fell 1.6%, EFA lost 1.5%, and the Europe proxy dropped 1.9%. The ECB raised all three policy rates by 25 basis points, taking the deposit rate to 2.50%. It projected headline inflation of 3.0% in 2026 and 2.5% in 2027.

Japan broke the pattern. EWJ rose 0.3% and the yen proxy gained 1.7%. Revised data showed the economy expanded at a 1.4% annualized rate in the second quarter. A Reuters poll found 66 of 68 economists expected the Bank of Japan to raise its policy rate to 1.25% on 18 September. The yen is moving before the decision because the direction is well priced.

China's data were stronger than its equity price. Exports rose 25% year over year in August and imports rose 28.2%. Yet FXI fell 3.9%. Export demand for AI and high-tech goods is supporting production, while weak domestic demand and rising input costs still limit the equity payoff.

Global growth is holding up, but central banks are removing support. That mix rewards regions with earnings upgrades and improving currencies. It punishes markets that need easier policy to offset domestic weakness.

Cryptocurrency Market

Bitcoin fell 3.1% from the 4 September close to the 11 September close. Ether gained 2.4%. The broader crypto market was weaker than ether, with speculative small caps selling off as traders raised the odds of a Fed hike.

Crypto's structural edge remains scarce supply and open financial rails. This week exposed the financing side of the trade. Higher Treasury yields raise the return available on safe assets and increase the cost of leverage. Bitcoin struggled under that pressure. Ether's relative strength suggests token-specific demand, but one week does not override the macro drag.

Economic Indicators, Statistics and News

Global: growth is surviving the energy shock

The latest global manufacturing PMI was 52.3 in August, a three-month high. Output, orders, and employment all expanded. Continued growth gives central banks room to respond to inflation without immediately reducing activity. It also means investors should expect policy restraint to last.

United States: inflation broadened enough to force a decision

Headline CPI rose 0.4% in August and 3.4% over 12 months. Core CPI rose 0.3% for the month and 2.4% over the year. Energy lifted the headline, but the higher-than-expected core monthly reading weakened the case for waiting. PPI reinforced it: final-demand prices rose 0.4% in August and 5.4% year over year, while energy prices rose 4.2%.

The Fed's problem is timing. The August CPI survey period predates oil's latest 9% weekly surge. A September hike cannot produce more barrels or reopen a shipping lane. It can stop an energy shock from spreading into wages, rents, and inflation expectations. That credibility channel is why the market moved the hike probability toward 85%.

Eurozone: the ECB moved first

The ECB raised rates by 25 basis points and said Middle East conflict would keep inflation above target for an extended period. It also raised its 2026 and 2027 growth forecasts to 0.9% and 1.4%. The combination matters. Better growth gave the bank room to tighten against an energy shock.

United Kingdom: services kept growth alive

UK GDP grew 0.4% in July, well above expectations for no growth. Services rose 0.4% during the month and drove the gain. The data reduce pressure for near-term easing before the Bank of England decision on 17 September.

Japan: better growth supports normalization

Japan revised second-quarter growth to 1.4% annualized from 1.1%. Capital spending was less weak than first estimated, while private consumption stayed flat. This is enough growth for the BOJ to tighten, though hardly enough to ignore the hit from expensive imported energy.

China: exports carried the economy

Exports grew 25% and the trade surplus reached $119.1 billion. Consumer inflation rose to 0.8%, while producer inflation accelerated to 3.8%. China is exporting high-tech capacity into strong global demand, but imported energy costs and weak domestic consumption leave the recovery unbalanced.

Foreign Exchange Markets

The broad dollar proxy was flat. The euro proxy slipped 0.1% and sterling gained 0.1%. The yen proxy rose 1.7%, the only large move in this set.

The yen's move is the useful signal. Japan is moving toward a 1.25% policy rate while U.S. and European rates also rise. That reduces the payoff from funding global positions in cheap yen. A faster unwind of yen-funded carry would tighten liquidity beyond what any single central bank intends.

Commodities and Energy Markets

Oil dominated the week. USO gained 9.1% and the Brent proxy gained 9.4%. Brent settled above $103 after touching almost $110. Hormuz vessel transits fell to seven on Thursday, versus a recent 10-day average of 15. Attacks also spread toward the Red Sea route, reducing the value of alternative export paths.

Restricted delivery drove the oil move. Demand did not accelerate. Copper fell 1.9% and gold lost 2.0%. Oil rose because reliable delivery capacity became scarce. The shortage benefits producers and reliable transport providers while raising costs for consumers and manufacturers and complicating monetary policy.

The invalidation is restored physical supply. More vessels through Hormuz, restored Saudi export capacity, or a credible shipping agreement would break the oil trade quickly. Until then, the price has to ration demand and fund alternatives.

Debt and Fixed Income Markets

The Treasury selloff was the week's clearest portfolio signal. The two-year yield rose from 4.37% to 4.63%. The 10-year moved from 4.78% to 4.96%, and the 30-year rose from 5.24% to 5.35%. The curve shifted higher while the front end moved most.

That shape reflects a likely Fed hike plus a higher inflation premium. TLT fell 1.6%, investment-grade bonds lost 1.1%, and high yield fell 0.7%. Credit did not break, which says investors still trust corporate cash flows. Long-duration bonds fell as the discount rate rose.

A 25 basis point Fed hike is now mostly priced. The bigger risk sits in the dots and Chair Kevin Warsh's framing. If the committee presents September as one insurance hike, long yields can settle. If it signals a sequence, the pressure spreads from bonds into equity multiples and refinancing risk.

What to Watch Next Week

Next week concentrates global policy risk into three days. The Fed decides on Wednesday, the Bank of England on Thursday, and the Bank of Japan on Friday. U.S. retail sales arrive before the Fed announcement. UK inflation and Japan trade data add more information to the same inflation-versus-growth argument.

• Federal Reserve: a 25 basis point hike is the base case. Watch the 2026 and 2027 dots. One hike with a flat path is manageable. A new tightening cycle is harder for equities.
• Oil flows: track Hormuz vessel traffic and Red Sea security. Physical normalization matters more than diplomatic headlines without restored barrels.
• Bank of Japan: the expected hike to 1.25% is largely priced. Guidance on the next move will decide whether the yen rally and carry unwind continue.
• Bank of England: a hold at 3.75% is expected. The vote split will show whether stronger growth and energy inflation are pulling more members toward a hike.
• Breadth: SPY can survive narrow leadership for a while. Another week of RSP and IWM underperformance would confirm that higher yields are damaging the average company.