Wall Street Erased the Fed Selloff | Oil Fell | Congress Split Bitcoin’s Fate

Wall Street bounced Thursday as oil and Treasury yields fell, taking pressure off risk assets one day after the Fed’s first hike since 2023.

The S&P 500 gained about 1%, while semiconductors rose roughly 3%. The Dow recovered part of Wednesday’s 631-point loss. The 10-year Treasury yield fell to about 4.95% after crossing 5% a day earlier, its highest level since 2007.

Oil helped drive the relief. Brent fell around 3% to $103, while WTI dropped to around $100 as Saudi Arabia moved more crude through Hormuz to offset its damaged East-West pipeline.

Japan’s Nikkei gained 0.33% to 64,136 as a weaker yen supported exporters. The Bank of Japan raised its policy rate to 1.25%, giving markets another test of how far global tightening can run.

The Signal

Falling oil and yields bought back much of what the Fed took away. That relief lasts only if both keep moving lower.

Saudi Arabia has found a workaround. It has not fixed the chokepoint.

The damaged East-West pipeline remains offline after last week’s drone attack. Saudi Arabia is moving more crude through Hormuz with U.S. military support and using ship-to-ship transfers near Oman’s Sohar port.

That has helped pull Brent down from above $110 earlier this month. But the physical risk remains. At least two vessels have been attacked in Hormuz since Saturday, while estimates for the pipeline repair range from days to weeks or longer.

The inflation damage is already visible. Brent remains more than 15% above August levels, while U.S. diesel reached a record $6.29 a gallon this week, up nearly 80% this year.

Energy Signal

The workaround is holding oil close to $101 - $105 levels. It does not remove the supply risk, and the price shock has already reached fuel markets.

Lower yields do not mean the Fed changed direction.

The central bank raised rates to 3.75% to 4.00% Wednesday. Its dot plot showed 16 of 18 officials expect at least one more hike this year.

Goldman Sachs now sees October as a possible next step. President Trump has called for rates of 1% or less, while Chair Kevin Warsh has continued to focus on inflation.

Diesel adds to that problem. Higher transport costs can move through freight, goods and consumer prices even if crude keeps falling from this month’s peak.

That leaves the Fed tightening into an energy shock it cannot directly fix. The Bank of Japan now becomes the next central-bank test.

Macro Signal

The Fed hike is done. The inflation test is not. Diesel at $6.29 could help decide whether October becomes another hike.

AI spending is moving beyond chips and cloud servers.

Generac (GNRC) surged more than 18% after Amazon (AMZN) received warrants to buy up to $340 million of shares as part of an $8 billion backup-generator deal for its data centers.

Micron (MU) gained more than 5% as memory demand tightened. Intel (INTC) CEO Lip-Bu Tan said some memory component prices have already risen five to seven times.

The message is broader than either stock. AI data centers need chips, memory, power and backup generation. The capex cycle is spreading across the supply chain even as the Fed raises the cost of funding it.

Financials have not escaped that pressure. Goldman Sachs (GS) fell nearly 4% on Fed day as investors priced the effect of higher rates and a flatter yield curve.

SpaceX (SPCX) has another test Monday, with Starship’s 14th flight set to trial new Starlink deployments and another booster catch.

Capital Signal

AI capex is reaching generators and memory. Higher rates have not stopped the build, but they are changing which parts of the market absorb the cost.

Congress sent crypto two different signals in 48 hours.

The Senate rejected the CLARITY Act in a 49-50 cloture vote Tuesday, short of the 60 votes needed to advance. Then the House Financial Services Committee voted 28-21 to advance the American Reserve Modernization Act, which would put the Strategic Bitcoin Reserve into federal law with a 20-year holding period.

Bitcoin barely reacted. It trades near $78,000, while no House floor vote is scheduled before lawmakers return after the November elections.

Institutional flows remain weaker. Spot Bitcoin ETFs lost $450 million on the CLARITY vote and another $296 million on Fed day, bringing the two-session outflow to $746 million. Total ETF assets sit near $95.2 billion.

JPMorgan also sees a gap between Bitcoin and gold flows. Gold ETFs have recovered their 2026 outflows, while Bitcoin ETFs have recovered only about half. Bitcoin remains down nearly 12% this year.

Zcash is moving against that trend. ZEC jumped 23% on Fed day to near $1,383.

Crypto infrastructure is also expanding abroad. Moscow Exchange plans to launch dollar-priced Bitcoin, Ether and Solana perpetual futures for qualified investors on September 22.

The Verdict

The Senate closed one policy route. A House committee opened another. Bitcoin is waiting for something stronger than a committee vote before repricing either one.

Thursday was a relief trade, not a resolution.

Oil fell because Saudi Arabia found another route. Yields fell because investors bought bonds after the Fed shock. Bitcoin held near $78,000 even as ETF outflows reached $746 million across two sessions.

The weak point connecting them is inflation.

Diesel at $6.29 shows how the oil shock can move from energy into business and household costs. That keeps another Fed hike alive even if Brent keeps falling.

The Bank of Japan is next. Congress will take longer.

For markets, the immediate question is simpler.

If Saudi Arabia’s workaround holds, oil and yields can keep easing.

If Hormuz breaks again, the Fed trade starts over.