S&P 500 Index: Oil Retreat Fuels Rally Despite 85% Fed Rate-Hike Odds

Dow Jumped 600 Points on Oil Retreat but Rate-Hike Odds Hit 85%

Stocks rallied Friday after crude oil dropped back below $100 and buyers came back in after four straight losing sessions. The Dow gained nearly 600 points. The S&P 500 and Nasdaq Composite each added about 1%. The move came on the same session August CPI pushed the probability of a September rate hike above 85%.

Iranian state media said Iran plans to meet Gulf states in Oman on Monday to discuss the Strait of Hormuz. WTI fell about 3% and traded back below $100. Brent also retreated. Both contracts are still up roughly 8% on the week. The Dow had been heading toward a 2.5% weekly loss before Friday’s bid. The S&P 500 and Nasdaq were both down about 1.6%.

At 18:18 GMT, September E-mini S&P 500 Index futures are trading 7,675.00, up 76.50 or 1.01%. The session high is 7,683.50. The low is 7,594.25.

Daily E-mini September S&P 500 Index Futures Technical Analysis

September E-mini S&P 500 Index futures are soaring late Friday after crossing to the strong side of the 50-day moving average earlier in the session.

The main trend is down according to the daily swing chart so today’s move is counter-trend. A trade through 7,585.50 will signal a resumption of the downtrend. Taking out 7,766.50 will change the main trend to up.

After reaffirming the downtrend on Thursday with the breakdown under 7,618.50, buyers stopped the slide at 7,585.50. More buyers came in early Friday ahead of the CPI report, preventing follow-through selling from gaining traction.

After the CPI data, enough new buyers came in to drive the index through the 50-day MA at 7,634.56 and prices soared on renewed momentum.

The intermediate range is 7,324.00 to 7,838.50. Its retracement zone is 7,581.25 to 7,520.50. Thursday’s low fell short of this value area at 7,585.50, however, buyers were willing to step in just above the zone.

The three main tops at 7,766.50, 7,782.50, and 7,838.50 all form key 50% levels with the 7,585.50 low. The 50% levels are 7,676.00, 7,684.00, and 7,712.00, respectively. Today’s high is 7,683.50 so the index is already testing the 50% cluster. This is a normal move following a prolonged decline and a subsequent bounce.

August CPI Pushed Rate-Hike Odds to 85.6%

August Consumer Price Index rose 0.4% from July and 3.4% year over year, matching headline estimates. Core CPI increased 0.3% for the month, slightly above expectations. That was not a friendly core number.

Fed funds futures repriced immediately. The probability of a quarter-point rate hike at next week’s meeting jumped to 85.6%. The 2-year Treasury yield touched its highest since July 2024. Longer-term yields held mostly steady. Stocks rallied anyway because crude dropping below $100 carried more weight than the CPI print for equities Friday.

Consumer Sentiment Dropped and Inflation Expectations Rose

The University of Michigan consumer sentiment index fell to 47.8 in September from 51.7 in August. Year-ahead inflation expectations climbed to 4.6% from 4.0%. Five-year expectations rose to 3.4%.

Stocks in the News

Dell jumped more than 10% after RBC started coverage with an outperform rating on AI infrastructure exposure. The chip-adjacent names followed. Skyworks Solutions gained more than 8% with its Qorvo acquisition expected to close before year-end and Qorvo rose about 5% on the same news. Shopify added nearly 4% after Bernstein initiated with outperform.

Oracle had been up as much as 10.3% on earnings and gave back the entire move by the afternoon. The stock beat on earnings and revenue and still could not hold.

Vicor rallied about 11% on a manufacturing expansion and GameStop gained nearly 3% after CEO Ryan Cohen disclosed the purchase of another 1 million shares. The nuclear names went the other way. NuScale Power dropped 14% after UBS downgraded to sell and Oklo fell more than 7% on a stock sale agreement. Qualys declined 6% on a Wedbush downgrade to neutral. RH gained nearly 2% on a second-quarter revenue beat.

What to Watch

Friday’s rally repaired some of the week’s damage on one catalyst: crude back below $100. CPI pushed rate-hike odds to 85.6%. The 2-year yield reached its highest since July 2024. Consumer inflation expectations rose to 4.6%. Buyers came in anyway once crude retreated. Iran meeting Gulf states in Oman on Monday is the next headline for crude. Both contracts are still up 8% on the week and the Middle East supply disruption has not ended. Wednesday’s Fed decision is the next scheduled event.

The main trend is still down on the swing chart. Friday’s move is counter-trend. The recovery above the 50-day moving average shifted momentum back toward buyers. The 50% cluster at 7,676.00 to 7,712.00 is the immediate test. Friday’s high at 7,683.50 is already inside that range. Failure there keeps the secondary lower top scenario alive and the downtrend intact. Clearing the area puts 7,766.50 in play where the trend can finally change.

More Information in our Economic Calendar.