Article by: Tide Research
Last Friday, U.S. equities ended a four-day losing streak with a rebound: the S&P 500 rose 0.86% to 7,656.98, the Dow Jones increased 0.98% to 52,573.29, and the Nasdaq advanced 0.96% to 26,333.04. For the week, the S&P 500 fell 0.8%, the Nasdaq declined 0.7%, and the Dow dropped 0.3%. The VIX stood at 16.89, down about 2.3%. The 10-year U.S. Treasury yield retreated to around 4.82%, while the 2-year yield hovered near 4.43%. The rebound was driven by three key factors: core CPI rose 0.3% month-over-month, exceeding expectations, pushing the probability of a Fed rate hike this week to nearly 90%; signs of de-escalation in the Middle East led Brent crude oil to retreat from its $107 peak; and Oracle’s earnings report strengthened expectations for AI computing demand, propelling Dell’s stock up 12% to a record high. However, U.S. futures dipped early Monday in Asian trading, with the Nasdaq 100 futures down 1%, as the three AI giants jointly called for slowing frontier model development, and OpenAI delayed its IPO. This week’s central question: after a rate hike is all but certain, can the market find a balance between the AI narrative and interest rate pressures?
Core CPI rose more than expected month-over-month, raising the probability of a rate hike to nearly 90%.
The U.S. August CPI data was the most important macroeconomic variable in the market last Friday. Core CPI rose 0.3% month-over-month, exceeding market expectations, while the year-over-year increase remained unchanged at 3.4%. Traders anticipate a roughly 90% probability of a Fed rate hike this week, and Goldman Sachs economists expect the Fed to raise rates by 25 basis points at the conclusion of its two-day meeting on September 16.
For the first 11 months of this fiscal year, the U.S. federal government’s budget deficit reached $1.97 trillion, with net interest payments soaring to $1 trillion—marking the first time interest expenses have surpassed the trillion-dollar mark. As the deficit nears $2 trillion and interest payments exceed $1 trillion, long-term U.S. Treasuries are being priced for a debt spiral, and supply pressures in the Treasury market have not eased despite rising expectations for rate hikes.
White House Director of the National Economic Council Hassett stated that both Trump and he see no reason to raise rates. The divergence between the White House and the Federal Reserve on the interest rate path has become more public, but market pricing suggests that a rate hike is nearing certainty.
Beyond macroeconomic factors, the AI sector saw a landmark shift over the weekend.
The three AI giants jointly call for a slowdown, as OpenAI delays its IPO.
OpenAI CEO Altman hinted that OpenAI and other leading AI companies may be close to reaching an agreement on slowing the pace of AI development to collectively address safety risks. Anthropic CEO Dario Amodei also called on AI companies to advance model development more cautiously, suggesting that the rate of improving AI model capabilities should be slowed. Both Musk and Altman support Amodei’s call for a “global slowdown in AI.”
Altman further stated that OpenAI will not go public this year and would rather destroy the IPO if AI threatens human survival. Simultaneously, the three major players have signaled a slowdown, and combined with OpenAI’s IPO delay, market expectations for the short-term pace of the AI narrative are being recalibrated. At the start of Asian trading on Monday, the Nasdaq-100 futures fell 1%, putting AI-related trades to a stress test.
Oracle's earnings report reinforced expectations for AI computing demand, and Dell rose 12% last Friday to a record high, continuing to validate the order logic in the AI server chain. The AI narrative is now diverging into two tracks: order growth in computing hardware and regulatory pacing in frontier model development.
At the same time, the Middle East situation sent complex signals over the weekend.
The Saudi oil pipeline disruption caused oil prices to retreat from their highs, but they rose again on Monday.
Reports indicate that Yanbu Port's inventory can sustain only 5 to 7 days of exports; if attacks on Saudi oil pipelines continue, the global market could face a 4% crude oil shortfall. The situation in Yemen has escalated sharply, with Houthi forces and Saudi Arabia launching mutual attacks. Iran has stated that it is "not at war" with Saudi Arabia, a phrasing that creates room for de-escalation.
Last Friday, international oil prices retreated from a four-month high, with Brent November contract falling 2% to $103.72 per barrel and WTI October contract dropping 2% to $100.26 per barrel, primarily driven by signs of easing tensions in the Middle East. However, in early Asian trading on Monday, international oil prices rose again, with WTI crude futures climbing over 2%, as renewed supply concerns emerged following Saudi Arabia’s closure of a key oil pipeline and the postponement of a meeting on the Strait of Hormuz. Oil prices continue to swing between expectations of easing tensions and the reality of supply disruptions, indicating that energy sector pricing remains far from stable.
Spot gold fell 0.51% to $4,399.20 per ounce, Bitcoin traded at approximately $78,342, up 0.26% in 24 hours; Ethereum traded at approximately $2,478, up 0.62%.
This Week's Focus
The Federal Reserve's September FOMC meeting (September 16–17). The probability of a rate hike has risen to nearly 90%, and this is largely priced in by the market. The true variable lies in the Fed’s guidance on its future path. If the dot plot indicates a second rate hike this year, long-term rates will face further pressure; if the language is dovish, the market may find relief. The White House’s public opposition to a rate hike also makes the narrative around the meeting’s independence noteworthy.
The follow-up to the AI giants' call for slowing down development remains to be seen. The three major players have rarely joined forces to urge a slowdown in frontier model development, but it is still uncertain whether this will translate into actual adjustments to R&D pace or new regulatory frameworks. If the iteration speed of AI models genuinely slows, demand expectations for compute hardware may face short-term revisions; if this is merely a rhetorical consensus, the market will quickly return to its order-driven logic.
U.S. Treasury supply and the debt spiral. With the deficit approaching $2 trillion and interest expenditures surpassing $1 trillion, long-term U.S. Treasury pricing is shifting from interest rate hike expectations to debt sustainability. After this week’s rate hike is implemented, whether long-term rates can stabilize will directly determine the valuation anchor for high-valuation assets.