Traders have re-priced the Federal Reserve, with the implied probability of an interest rate increase at the next Wednesday's meeting climbing to roughly 90%. This shift occurred after back-to-back inflation reports indicated that price pressures are not fading as quickly as anticipated.

The Producer Price Index (PPI) for Thursday showed the annual rate quickening to 5.4% from 4.8%. Meanwhile, the Consumer Price Index (CPI) held the headline rate at 3.4% year-over-year, but core prices—which strip out food and energy—advanced 0.3% month-over-month, exceeding forecasts of 0.2%.

Energy costs are driving these monthly readings. Gasoline alone accounted for more than a third of August's increase in consumer prices, rising 3.9% for the month and 27.4% year over year. West Texas Intermediate crude pushed above $100 a barrel, its highest level since July, after strikes around the Strait of Hormuz. Crude has gained more than 70% in 2026. The International Energy Agency also deepened the squeeze by removing 1.4 million barrels per day from its 2026 global supply forecast.

Diesel prices are particularly elevated. The national average reached a record $6.06 a gallon on Friday, the first time it has surpassed $6 and 63% higher than a year ago. This surge affects freight, farming, and construction, spreading the energy shock throughout the economy.

Consumer sentiment is reflecting this economic stress. The University of Michigan’s preliminary September sentiment index sank to 47.8 from 51.7, missing expectations of 51.0. Consumers now expect prices to climb 4.6% over the next 12 months, up from 4.0% in August.

Long-term bond yields have also climbed. The 30-year Treasury yield reached 5.35%, a level last seen in May 2007, while the 10-year touched 4.96% and the 2-year moved above 4.5%.

Equities fell for four consecutive sessions before rebounding on Friday, with the major averages adding about 1.1% as crude prices retreated. Despite the bounce, the Dow Jones Industrial Average was down roughly 1.8% for the week, with the S&P 500 and Nasdaq 100 also modestly lower.

Apple Inc. (NASDAQ: AAPL) saw its stock rise 1.87% this week. The company is set to open pre-orders for the foldable iPhone Duo on Saturday. Skyworks Solutions Inc. (NASDAQ: SWKS) topped the S&P 500 with a 28.1% advance, driven by the iPhone Duo launch and CEO Phil Brace’s comment that the company's $22 billion all-stock merger with Qorvo Inc. (NASDAQ: QRVO) is in its final stages and expected to close by year-end.