| Waterloo Capital |
RESEARCH · WEEKLY DISPATCH |
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| WEEK OF SEPTEMBER 8TH, 2026 |
THE WATERLOO RESEARCH DESK |
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Last Week on Wall Street
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| Market Summary · Weekly Close · Year to Date | | S&P 500 | 7,667 | ▼ -0.59% WK | ▲ +12.00% YTD | | Dow Jones | 52,626 | ▼ -1.41% WK | ▲ +9.49% YTD | | Nasdaq | 26,363 | ▼ -0.46% WK | ▲ +13.43% YTD | | 10-Yr Yield | 4.93% | ▲ +15 BPS WK | ▲ +77 BPS YTD |
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Four straight sessions of selling, a shooting war in a shipping lane, and then a Friday morning inflation print that ended the argument: the Fed is almost certainly raising rates on Wednesday, and stocks rallied on the news.
Stocks fell Tuesday, fell Wednesday, fell Thursday, and then spent Friday taking most of it back. The S&P 500 and the Nasdaq each closed about a percent higher on the day and each still finished the week lower, which tells you how rough the first four sessions were. Four days down, one day up, and a net loss. Nobody is framing that one. Oil ran the week. New fighting around the Strait of Hormuz sent crude to levels it had not touched since the spring, and every time the barrel moved the bond market moved with it. The 10-year yield reached a 52-week high on Thursday and the short end came along for the ride. Higher energy costs mean higher inflation, higher inflation means a central bank that has to answer for it, and by Thursday afternoon nobody was calling the September meeting a coin flip anymore. Then Friday's consumer price report arrived roughly where economists had penciled it in, oil finally gave some back, and the mood turned on a dime. So the Fed meets Wednesday with the market having all but decided the answer for it, and the answer is a rate increase, the first of this cycle. That is a strange place to land after two years of arguing about when the cuts would start. The less comfortable part is where the inflation came from. It did not come from an economy running hot; it came out of a shipping lane. Wednesday settles what the Fed does. It does not settle what the Fed can reach.
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BOTTOM LINE
Stocks lost ground on the week, then rallied at the confirmation that money is about to get more expensive. The tape has decided a rate increase is the answer to an oil shock; Wednesday is when the Fed says whether it agrees.
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By the Numbers | | Two winning weeks, then this one: the S&P 500 and the Nasdaq both finished lower on the week, ending the streak | | Four sessions of selling: the S&P 500 shed roughly 2% over the four trading days through Thursday before Friday's bounce | | The long end moved too: the 30-year Treasury yield sat near 5.36% on Thursday as the whole curve repriced | | Wholesale prices: producer prices rose 0.4% in August and 5.4% over the year, a shade above forecasts, with energy responsible for most of the increase | | Friday's breadth: ten of eleven S&P 500 sectors finished higher, led by communication services and information technology | | VIX closed Friday at 15.63, a notably calm reading for a week that ended with a rate increase all but locked in |
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Two Stories That Moved the Tape
The Week's Defining Headlines
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The key takeaway, consumer prices rose in August at exactly the pace economists expected. Underneath the headline, gasoline did more than a third of the month's work by itself, while the part of the basket that has nothing to do with energy kept cooling. Two different inflation stories arrived in the same report.
The Bureau of Labor Statistics reported that the consumer price index rose 0.4% in August and 3.4% over the past twelve months, matching July's annual pace and landing on consensus. Core prices, which strip out food and energy, rose 0.3% on the month and 2.4% over the year, down from 2.5% in July. Taken alone, that core number is the kind a central banker reads and exhales. Then there is the rest of the report. The gasoline index rose 3.9% in August and is up 27.4% over twelve months. Energy overall climbed 2.1% on the month and 16.3% on the year. By the BLS's own accounting, gasoline alone accounted for over a third of the monthly increase in the all items index. Shelter, the largest single component and the one that usually sets the core, rose 0.3% and is running at 3.0% annually. Food rose 0.1%. Strip out the barrel and this is a report about an economy whose price pressures are fading. Traders read it as settling the September question rather than complicating it. Futures pricing for a quarter-point increase at Wednesday's meeting moved from roughly 72% on Thursday to nearly 90% by Friday's close, and the 10-year yield eased back after brushing 5% earlier in the week. Thomas Martin of GLOBALT Investments called it about as close to a slam dunk as you are going to get. Which leaves the question the report does not answer: what a higher policy rate does to a gasoline price being set several thousand miles offshore.
Data That Drove the Story | | August CPI: +0.4% on the month and +3.4% over twelve months, both in line with forecasts | | Gasoline: +3.9% in August and +27.4% over the year, accounting for over a third of the monthly all items increase | | The core kept cooling: prices less food and energy rose 0.3% on the month and 2.4% on the year, down from 2.5% in July |
SOURCE: BLS: Consumer Price Index, August 2026 →
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The key takeaway, American forces destroyed five Iranian oil tankers this week. Iran answered by attacking roughly ten ships near the Strait of Hormuz and firing missiles at a base in Jordan. Crude crossed $100 on Wednesday for the first time since May, ran higher Thursday, and handed some of it back Friday. This week's inflation problem has a map reference.
U.S. Central Command struck five Iranian oil tankers on September 8 and 9, directing the crews to abandon ship before the vessels were hit. Iran's Revolutionary Guard answered with attacks on roughly ten ships near the Strait of Hormuz and missile fire at the Al-Azraq base in Jordan, then declared a maritime restricted zone running from Chabahar into the Gulf of Oman and the Arabian Sea. Tehran says the strait is closed. Washington is enforcing a naval blockade of Iranian ports. Six months into this conflict the two positions have converged on the same practical outcome: the busiest oil chokepoint on earth is not somewhere a shipowner wants to be. The price followed the news, in order. Brent crude cleared $100 on Wednesday, up 3.4% to $101.21 and its highest since May. Thursday it traded above $108 before settling near $107.60, with West Texas Intermediate just over $100. Friday brought the week's only real relief: Brent fell 3.6% to $103.70 and WTI slipped to $99.05, and that decline is most of the reason stocks had a good afternoon. Even after giving that back, Brent finished the week up more than 9%. The number that travels is the starting point: Brent was under $72 in early July. A barrel that has risen by half in two months does not stay inside the energy complex. It turns up at the pump, in the freight rate, in the jet fuel contract and eventually in the consumer price index, on a lag measured in weeks rather than quarters. The Federal Reserve meets Wednesday to decide what to do about inflation that is currently being set by a naval standoff. Interest rates do not reopen shipping lanes.
Data That Drove the Story | | The exchange: U.S. forces destroyed five Iranian tankers on September 8 and 9; Iran attacked roughly ten ships near the strait and fired on a base in Jordan | | Crude's week: Brent cleared $100 Wednesday and topped $108 Thursday before easing to $103.70 Friday, a weekly gain of more than 9% | | The starting point: Brent traded under $72 in early July, before the latest Hormuz escalation |
SOURCE: Al Jazeera: US strikes five Iranian oil tankers, Iran retaliates →
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Other Things Worth Knowing
Around the Water Cooler
Six stories from this week worth your morning coffee.
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