The 10-Year Broke 5% | Oil Holds Near $107 | The Fed Meets Today | CLARITY Faces Its Vote

Tuesday opens with chips already pricing a harder week.

The S&P 500 fell 0.5% Monday, while the Nasdaq lost about 0.6%. The larger move came in semiconductors. The Philadelphia Semiconductor Index dropped 5.9% and is now more than 20% below its June peak.

Nvidia (NVDA) fell 3.4%, while Intel (INTC) lost 5.6%. The selloff followed the weekend push from AI leaders to slow frontier development.

Rates added another hit. The 10-year Treasury yield touched 5.014%, its highest since October 2023, before easing to 4.96%.

Asia was mixed Tuesday. Japan’s Nikkei gained about 0.4% on reports Kioxia Holdings may seek a U.S. depositary listing that could raise more than $10 billion. South Korea’s Kospi slipped 0.25%.

The Fed opens its two-day meeting today. The Senate votes on CLARITY at 2:15 p.m. ET.

The Signal

Chips are in a bear market while the broader index remains near records. Wednesday’s Fed decision tests whether that gap gets wider.

Oil is holding the war premium.

Brent trades near $107, while WTI sits near $103. Saudi Arabia’s East-West pipeline remains shut after last week’s drone attack.

That line can move up to 7 million barrels per day to Red Sea terminals, giving Saudi crude a route around Hormuz. Its loss matters because tanker traffic through the Strait remains weak.

The Red Sea route is under pressure too. Houthi advances near Bab el-Mandeb have added another risk point, while Gulf states postponed talks with Iran over reopening Hormuz.

The IEA estimates more than 4 million barrels per day of supply has been lost since February.

The shock has reached fuel markets. U.S. diesel prices hit another record Monday and are up about 30% since late June. Russia’s diesel export ban expires at month-end, but traders expect it to be extended.

Energy Signal

Oil is not rising on a new shock. It is holding near $107 because the old ones remain unresolved. Hormuz is impaired, Saudi Arabia’s bypass is shut, and diesel supply remains tight.

The Fed begins its meeting with the bond market already tightening for it.

The 10-year briefly reached 5.014%. The 2-year climbed to 4.68%, while the 30-year touched 5.39%.

Yields are rising outside the U.S. too. Australian and U.K. 10-year yields are both above 5%.

August CPI gave the Fed little relief. Core prices rose 0.3% on the month, above the 0.2% expected, while headline inflation remained at 3.4% annually.

Markets now price better than 90% odds of a quarter-point hike Wednesday, which would be the Fed’s first increase since 2023.

The problem is timing. Hiking can cool demand, but it cannot reopen Hormuz or repair Saudi Arabia’s pipeline.

Macro Signal

The Fed has not hiked since 2023. It opens this meeting with oil near $107 and the 10-year already testing 5%. The market has done part of the tightening before the Fed votes.

The chip selloff now has a funding problem attached to it.

Kioxia Holdings is reportedly considering a U.S. depositary listing that could raise more than $10 billion. That comes just as the Philadelphia Semiconductor Index enters a bear market.

The timing matters.

AI infrastructure still requires huge spending on chips, memory, data centers and power. But the market is questioning the pace of that buildout at the same time the cost of financing it is rising.

A 10-year yield near 5% raises that cost across the sector. A Fed hike Wednesday would reinforce the same pressure.

Demand has not disappeared. The price investors are willing to pay for that demand has changed.

Capital Signal

AI companies need more capital while investors are assigning less value to future growth. That is the squeeze behind the chip selloff.

Crypto gets its decision one day before the Fed.

The Senate holds its CLARITY Act cloture vote at 2:15 p.m. ET. The bill needs 60 votes. Republicans hold 53 seats, meaning Democratic support is required.

New ethics language limits public officials from issuing or sponsoring digital assets. But disputes remain over DeFi developer liability and stablecoin yields, an issue that could affect Coinbase’s (COIN) USDC business.

Polymarket puts 2026 passage odds near 16% to 22%, while Galaxy Research puts them around 10%.

Bitcoin trades near $78,500, below $80,000 resistance but above the roughly $76,600 on-chain cost basis.

ETF flows are shifting. Bitcoin funds lost $462.7 million last week after three weeks of inflows totaling $987 million. Ether funds gained $196.9 million, including $148.8 million into BlackRock’s ETHA in one session.

The Verdict

Bitcoin is holding support while institutional money rotates toward ether. Tuesday decides whether regulatory clarity moves closer. Wednesday decides what that capital will cost.

The next 48 hours test two different kinds of risk.

The CLARITY vote tests whether crypto gets clearer rules. The Fed tests whether markets get even tighter money.

Both arrive with the 10-year near 5%, Brent near $107 and chips already more than 20% below their peak.

That connects the tape.

Higher yields make AI expansion harder to fund. High oil keeps inflation firm. A failed CLARITY vote keeps crypto capital cautious.

The market has already priced a Fed hike.

Now it has to decide whether that hike calms inflation fears or adds another problem to growth.