US equities opened lower on Monday as the Federal Reserve began a two-day meeting expected to deliver its first rate hike since 2023. The CME FedWatch tool puts the odds of a 25 basis-point move at roughly 92% to 95%, while the 10-year Treasury yield topped 5% and oil prices jumped on Middle East supply concerns.
US equity markets opened lower on Monday as traders awaited the Federal Reserve's rate decision. The FOMC's two-day meeting kicked off on September 15, with a decision expected the following day, and the consensus view is that the central bank will raise rates for the first time since 2023.
Futures pointed to modest declines across the board. The Dow Jones Industrial Average was projected to slip between 0.2% and 0.6%, while the S&P 500 tracked about 0.2% to 0.5% lower. The Nasdaq-100 looked set to fall roughly 0.1% to 0.5% in early trading.
The case for a rate hike
The CME FedWatch tool put the probability of a 25 basis-point increase at roughly 92% to 95%. That would push the federal funds target range to 3.50%-3.75%.
Brent crude surged above $106 per barrel, driven by supply concerns tied to the closure of a critical Saudi pipeline amid geopolitical tensions in the Middle East. West Texas Intermediate also cleared $102 on the same supply concerns.
The 10-year Treasury yield crossed 5.04% on September 15, a threshold not breached since 2007. The Fed's previous meeting on July 29-30 resulted in a 9-3 vote to hold rates steady.
AI stocks feel the heat
Nvidia saw an intensified sell-off following remarks from Anthropic's CEO about safety risks associated with the rapid advancement of artificial intelligence tools.
What traders are watching
Markets have priced in the 25 basis-point hike with near-certainty. Therefore, what actually moves markets will be the Fed's forward guidance: the dot plot projections, the press conference language, and any hints about whether this is a one-and-done hike or the start of a tightening cycle.
Treasury yields above 5% now offer a competitive alternative to equities for the first time in nearly two decades.
Source: Crypto Briefing
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