Stocks Extend Rally as Fed Hike Bets Fade; Oil Slides on Strait Flow Recovery

Market Snapshot

S&P 500 (SPY) — 774.83 (+0.67%) [Twelve Data] · Nasdaq 100 (QQQ) — 756.20 (+0.88%) [Twelve Data] · Dow Jones (DIA) — 512.11 (+0.20%) [Twelve Data] · Gold (GLD) — 379.55 (-0.16%) [Twelve Data] · US Oil (USO) — 143.99 (-2.29%) [Twelve Data] · Bitcoin (BTC) — 85,588 (-0.79%) [Binance US] · Ethereum (ETH) — 2,708 (-0.64%) [Binance US]

Stock Markets

US equities extended their advance as traders dialed back expectations for near-term Federal Reserve tightening, with the Nasdaq 100 notching a record close. The tech-heavy index rose 0.88%, outpacing the S&P 500's 0.67% gain and the Dow's modest 0.20% increase. According to Reuters, the Nasdaq's strength came as investors shifted focus toward the upcoming earnings season, with analysts projecting S&P 500 earnings growth exceeding 30% year-over-year for the third quarter.

Crypto Markets

Bitcoin retreated 0.79% after testing the $87,000 level for the second time in a week, marking another failed attempt to break its eight-month high. According to CoinDesk, the largest cryptocurrency climbed within $500 of that threshold early in the session before sellers stepped in, dragging prices back below $86,000. The reversal mirrored a similar pattern from earlier in the week, suggesting resistance remains firm at current levels.

Institutional positioning is turning more constructive despite the near-term price weakness. CoinMarketCap reported that large reportable traders on CME are now modestly net long in Bitcoin futures, according to the latest Commodity Futures Trading Commission data. Hedge funds have reduced short positions while ETF inflows have recovered, signaling institutional traders believe Bitcoin may have bottomed. CoinDesk noted that the shift in sentiment coincides with markets pricing out an October Fed rate hike, reducing the opportunity cost of holding non-yielding crypto assets.

Broader altcoin markets showed mixed performance, with Ethereum down 0.64%, Solana falling 1.21%, and both XRP and BNB declining around 1.4%. The SEC approved the first 3x leveraged Bitcoin and Ethereum ETFs in the US, according to CoinDesk, expanding the toolkit for institutional and retail traders seeking amplified exposure to crypto volatility. The products arrive as daily trading volumes in crypto markets remain elevated, though the range-bound price action suggests participants are awaiting a clearer directional catalyst.

Regulatory developments continue to shape the landscape. The Wall Street Journal reported that the CFTC has introduced new rules for crypto markets as Washington moves to clarify the treatment of digital assets under federal law. The White House also unveiled a new AI task force led by Director of National Intelligence Jay Clayton, who emphasized the importance of US leadership in emerging technologies including blockchain applications. The 120-day mandate includes assessing risks and opportunities in artificial intelligence, with potential spillover implications for crypto infrastructure and digital asset regulation.

Macro & Global Drivers

Central bank policy divergence and geopolitical risk remain the dominant macro themes shaping global markets. The European Central Bank's diagnostic challenges in setting appropriate monetary policy were outlined in a speech at the ECB's 2026 conference on monetary policy, with officials emphasizing three criteria for interest rate decisions: the inflation outlook, risks surrounding that outlook, and incoming economic data. ECB policymakers are navigating persistent inflation above target while monitoring the propagation of long-term yield increases from the United States.

In an interview with Ansa, an ECB official highlighted geopolitical risk and the energy shock as key uncertainties, alongside the marked increase in long-term yields emanating from US markets. The eurozone faces inflation running at 3.8%, nearly double the 2% target, with ECB board member Nagel noting that price pressures could still increase, according to Reuters. The risk of second-round effects—where high inflation becomes embedded in wage-setting and pricing behavior—remains a central concern for European policymakers.

Japanese government bonds rose in early Tokyo trade, tracking overnight gains in US Treasuries as reduced Fed rate-hike prospects supported fixed income globally, according to the Wall Street Journal. JGBs and Treasuries tend to move in tandem, with the correlation particularly strong during periods of shifting central bank expectations. Fed Vice Chairman Jefferson's comments that the US central bank may need more time to decide its next move, even as inflation risks tilt to the upside, reinforced the dovish shift in market pricing.

The ECB published research on the term structure of inflation risks using prices of traded zero-coupon inflation caps and floors, developing a methodology to estimate risk-neutral densities at short-, medium-, and long-term horizons. The focus on long-horizon risks identified from liquid instruments alone, at daily frequency, reflects central banks' efforts to better diagnose inflation dynamics in an environment of elevated uncertainty. Geopolitical developments, energy market volatility, and the transmission of US monetary policy through global bond markets continue to complicate the outlook for both growth and inflation across major economies.

Stocks Extend Rally as Fed Hike Bets Fade; Oil Slides on Strait Flow Recovery

Market Snapshot

Stock Markets

S&P 500 Hits Record High as Tech Rally Extends; Bitcoin Slides Below $85,000

Gold & Commodities

Oil

Crypto Markets

Macro & Global Drivers

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