The Fed Decides Today | The 10-Year Hits 5% | CLARITY Dies | Oil Holds Near $104

The Fed decides at 2 p.m. ET today, with CME FedWatch pricing a 25-basis-point hike at 100%.

It would be the first increase since 2023.

Tuesday set the stage badly. The Dow fell 328 points, or 0.63%, to 52,093. The S&P 500 lost 0.45%, while the Nasdaq fell 0.78%.

The larger signal came from bonds. The 10-year Treasury yield touched 5.01%, its highest since July 2007, before settling near 4.99%.

Asia split overnight. Japan’s Nikkei gained 0.4% to above 63,700 even as markets expect the Bank of Japan to raise rates Thursday. Kioxia rose 2.5% on reports it may seek a U.S. ADR listing that could raise more than $10 billion.

U.S. futures are little changed. The hike itself is no longer the question. Chair Kevin Warsh’s press conference and the new dot plot will show whether another 2026 hike is coming.

The Signal

A fully priced hike can still move markets through the dot plot. The 10-year near 5% is the pressure the Fed cannot ignore.

Oil is holding the war premium because the backup route remains broken.

Brent trades near $105 to $107, while WTI sits near $103. Saudi Arabia’s East-West pipeline remains shut after last week’s drone attack.

The line can carry about 7 million barrels per day to Red Sea terminals, giving Saudi crude a route around Hormuz. Saudi Arabia has reportedly cancelled some September deliveries to Europe and suspended loadings at Yanbu.

Libya has also halted two oilfields. Another tanker was attacked Sunday, while Oman postponed a planned regional dialogue.

U.S. Energy Secretary Chris Wright expects the Saudi pipeline to return soon. But there is still no firm repair timeline.

Energy Signal

Oil has stayed above $100 without a repair date. The market is no longer treating the war as a short shock. It is pricing the loss of safe supply routes.

Today’s Fed decision is only half the central-bank story.

The Bank of Japan meets Thursday and is widely expected to raise rates by 25 basis points to 1.25%. All 52 economists in a recent Bloomberg survey expect the move.

That puts two major central banks on course to tighten within 48 hours while oil remains above $100.

The June Fed dot plot implied one 2026 hike. Futures now price two by year-end. If today’s dots confirm another move, the one-and-done case gets much harder to defend.

The household data give the Fed some room. Real median U.S. household income rose 2.6% to $87,460 in 2025, while the poverty rate fell to 10.2%.

But that data came before the latest pressure. Mortgage rates are now above 7%, gasoline is near $4.32 a gallon, and diesel is around $6.23.

Macro Signal

The vote is priced. The path is not. The dot plot decides whether today’s hike is the peak or another step in a longer tightening cycle.

The AI trade is being tested from both sides.

Corning (GLW) fell after disclosing a $2 billion at-the-market equity program. The move dragged Coherent (COHR), Lumentum (LITE) and Fabrinet (FN) lower even as Corning guided third-quarter sales to $4.9 billion to $5 billion.

The market is pricing dilution before AI demand itself has broken.

That follows Anthropic CEO Dario Amodei’s call to slow frontier AI development, with Sam Altman and Elon Musk backing parts of the argument. The debate is now reaching Washington as AI firms discuss common safety standards.

The pressure is wider than AI. Bank of America (BAC) fell 5% Monday after CEO Brian Moynihan warned third-quarter banking fees could fall more than 10% from a year ago.

Capital Signal

AI needs more capital just as that capital becomes more expensive. A Fed hike into 5% Treasury yields raises the cost of funding the next stage of the buildout.

Crypto enters the Fed decision without its biggest policy catalyst.

The CLARITY Act failed Tuesday. The Senate vote finished 49-50, short of the 60 votes needed to advance the bill. The setback pushes the industry back toward SEC and CFTC rulemaking.

Bitcoin fell from nearly $80,000 and trades near $76,000. Coinbase (COIN), Circle (CRCL) and Galaxy Digital (GLXY) also sold off.

Smart-contract risk added another problem. A hacker used two flaws in the Symbiosis Bitcoin Bridge to turn a 25-cent deposit into 46.1 billion unbacked syBTC tokens, more than 2,000 times Bitcoin’s supply cap.

Actual losses stayed near 9.97 BTC, about $770,000, because the fake tokens lacked enough liquidity to be redeemed. Symbiosis has taken the bridge offline for a rewrite.

Separately, the Justice Department is seeking $61 million it says came from crypto-laundered proceeds tied to sanctioned Iranian oil sales.

The Verdict

Crypto lost its legislative catalyst before a fully priced Fed hike. Bitcoin now has to hold near $76,000 while both regulatory and rate risk stay open.

Wednesday compresses the week into one Fed decision.

The 10-year is near 5%. Oil remains above $100. Bitcoin is near $76,000. AI capital is getting more expensive, while CLARITY has failed to clear the Senate.

Thursday adds the Bank of Japan, with a move to 1.25% expected. That puts another source of global liquidity under pressure.

The connections are getting tighter. Higher yields raise the AI funding bill. High oil keeps inflation firm. Failed crypto legislation leaves more policy risk with regulators.

The Fed hike is priced.

The dot plot decides whether the market should start pricing the next one.