| Waterloo Capital |
RESEARCH · WEEKLY DISPATCH |
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| WEEK OF SEPTEMBER 14TH, 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 | 7,642 | ▼ -0.20% WK | ▲ +11.63% YTD | | Dow Jones | 51,708 | ▼ -1.65% WK | ▲ +7.58% YTD | | Nasdaq | 26,505 | ▲ +0.65% WK | ▲ +14.04% YTD | | 10-Yr Yield | 5.00% | ▲ +7 BPS WK | ▲ +84 BPS YTD |
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Three years without a rate increase ended on Wednesday afternoon, stocks spent two days arguing about it, and the ten-year yield finished the week exactly where nobody wanted it.
Stocks fell Monday, fell Tuesday, and fell again Wednesday after the Federal Reserve said what everyone already knew it would say. Then Thursday arrived and took most of it back: the S&P 500 gained more than a percent, the Nasdaq more than one and a half, and Friday added a sliver on top. The S&P still finished the week lower, its second losing week in a row. The Nasdaq finished higher, which is not a sentence anyone expected to write about a week that contained the first rate increase of this cycle. What moved the tape was not the decision, it was the tone that came with it. Chair Kevin Warsh spent his press conference making the case that a quarter point is a start rather than a finish, and the Treasury market took him at his word. Yields ran to levels this market has not seen in nearly two decades by midweek, eased Thursday when the selling stopped, and climbed straight back Friday. Oil, for once, behaved itself: Brent slipped on Friday and ended the week close to where it began, after a month in which it did nothing of the sort. August retail sales landed hot on Wednesday morning, which did not help anyone hoping the economy would make the argument for patience. So the week ends with the argument moved rather than settled. Nobody is debating whether the Fed will act; it acted. The debate now is how much of this inflation a policy rate can actually reach, given where most of it is coming from. Washington can make money more expensive. It cannot reopen a shipping lane. That leaves a market watching two things at once, and only one of them meets again in October.
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BOTTOM LINE
The Fed raised rates and the tape spent the rest of the week deciding it was not enough. Stocks finished lower, the long end of the curve finished higher, and the open question is no longer what the Fed will do but what it can reach.
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By the Numbers | | A second straight losing week for the S&P 500, which fell in three of the week's five sessions | | A split tape: the Nasdaq finished the week higher while the S&P 500 finished lower, an unusual divergence over five days | | August retail sales: +1.2%, better than forecast, after shoppers pulled back in July | | Thursday's relief rally: technology led every sector, up roughly 2.25%, as yields backed off their midweek highs | | Oil stood still: Brent settled near $103 after slipping about 1.7% on Friday, close to where it started the week | | Quarterly triple witching: Friday brought the simultaneous expiration of index and single-stock options and futures, which adds volume and noise to the close |
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Two Stories That Moved the Tape
The Week's Defining Headlines
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The key takeaway, the Federal Reserve raised its benchmark rate a quarter point on Wednesday, the first increase since July 2023, and did it without a single dissent. The harder part was the forecast that came with it: almost every official on the committee expects at least one more before the year is out.
The Federal Open Market Committee lifted the federal funds target range to 3.75% to 4% on Wednesday afternoon, a quarter-point increase and the first since July 2023. The vote was unanimous, 12 to 0, which is unusual for a move this consequential. The statement described an expansion proceeding at a solid rate, resilient domestic spending, strong productivity growth and robust capital investment, and then said the quiet part plainly: inflation remains elevated, and the increase is meant to support a timelier return to the 2% goal. Chair Kevin Warsh put it less diplomatically, saying inflation is too high and has been for too long. The projections did the real damage. The median official now pencils in one more quarter-point increase before year end, and 16 of the 18 policymakers submitting forecasts expect at least one more, with the rate holding near that level through 2027. The distance they are trying to close is not small: the PCE price index ran near 3.6% in August and the core measure near 3.2%, against a target the Committee has not hit in more than five years. Stocks sold off into Wednesday's close and then took most of it back Thursday, which is roughly the behavior of a market that accepts the diagnosis and is still negotiating over the dose.
Data That Drove the Story | | The decision: a quarter-point increase to a 3.75% to 4% target range, the first since July 2023, on a unanimous 12 to 0 vote | | The forecast: the median official expects one more quarter-point increase this year, and 16 of 18 expect at least one more | | The distance: PCE inflation near 3.6% in August and core PCE near 3.2%, against the Committee's 2% goal |
SOURCE: Federal Reserve: FOMC statement, September 16, 2026 →
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The key takeaway, the 10-year Treasury yield reached its highest level since 2007 on Tuesday and finished the week sitting on a round number that matters. The Fed sets the overnight rate. The ten-year is set by what investors expect inflation to average over the next decade, and this month that expectation is being written in a shipping lane.
The 10-year yield touched 5.025% on Tuesday, a level it has not reached since 2007, and the rest of the curve came with it: the 30-year climbed to 5.384% and the 2-year to 4.68%. Thursday brought a brief retreat, Friday gave it back, and the 10-year finished the week at 5.00%. The mechanism is not mysterious. Jonathan Liang of Standard Chartered noted that 10-year Treasury bonds are highly sensitive to inflation expectations, and the correlation between crude futures and Treasury yields has run near 0.96 this month. The bond market is pricing a barrel, not a business cycle. A 5% ten-year is not an abstraction, because it is the reference rate for most of what households and companies borrow against. Freddie Mac reported Thursday that the 30-year fixed mortgage averaged 6.95% this week, 69 basis points above where it stood a year ago, and that is the version of this story that turns up at a closing table. Corporate refinancing works the same way on a longer fuse. The uncomfortable arithmetic is that the Fed's quarter point lands on the front end of the curve, while the borrowing cost that actually reaches the economy is being set at the far end, by something the Committee does not control.
Data That Drove the Story | | The long end: the 10-year yield reached 5.025% Tuesday, its highest since 2007; the 30-year hit 5.384% and the 2-year 4.68% | | The mortgage: Freddie Mac's 30-year fixed averaged 6.95% this week, 69 basis points above a year ago | | What is setting it: the correlation between crude futures and Treasury yields has run near 0.96 |
SOURCE: CNBC: 10-year Treasury yield hits highest level since 2007 →
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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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