NEW YORK, July 27, 2026, 19:19 EDT — U.S. cash equities finished trading.
- WTI closed at $82.61, a decline of 7.5%. The S&P 500 finished 0.02% higher.
- Chances of a Fed rate increase climbed to 38%, compared to about 10% two weeks ago.
- The chip index dropped 2.2% and now stands 21% beneath its June peak.
The S&P 500 edged up 0.02% on Monday, while U.S. crude slumped 7.5%. The yield on the 10-year Treasury slipped four basis points. The drop in oil prices provided little boost to risk assets.
Fed funds futures closed suggesting a 38% probability of a 25-basis-point increase on Wednesday, up 28 percentage points from about 10% two weeks prior. The likelihood has almost quadrupled.
| Indicator | Monday close or settlement | Earlier comparison |
|---|---|---|
| S&P 500 | 7,413.18; up 0.02% | fell 0.6% over the past week |
| Nasdaq Composite | 24,932.08; down 0.18% | declined 2.0% over the last week |
| WTI crude, September | $82.61; down 7.5% | climbed 9.2% last week |
| 10-year Treasury yield | 4.65% | 4.69% at the Friday close |
| July Fed hike probability | 38% | Roughly 10% two weeks prior |
The previous week created the setup. The S&P 500 declined by 0.6%, and the Nasdaq Composite dropped 2.0%. WTI climbed 9.2%, with Brent momentarily surpassing $100.
Crude oil’s rally was undone on Monday, yet the broader inflation premium held firm. The yield on the 10-year ended close to 4.65%, compared to 4.69% on Friday. The modest decline suggested investors remain skeptical about a sustained drop in oil prices.
Bloomberg said on Monday that Citadel Securities anticipates a Federal Reserve rate increase this week. Frank Flight, who leads macro strategy at the company, previously stated that markets are “underpricing the probability of a July hike.” An increase of a quarter-point would set the target range at 3.75%-4.00%. Yahoo Finance
The Federal Reserve unanimously kept its target range at 3.50%-3.75% in June. It stated inflation was still high and pledged to “deliver price stability.” Flight argues that an energy shock may persist even as oil prices decline. Federal Reserve
The majority of major brokerages continue to anticipate no rate change on Wednesday, maintaining that central banks ought to disregard short-term energy price surges. Ex-Minneapolis Fed President Narayana Kocherlakota described Warsh as “studiously uncommunicative” regarding potential policy actions. Reuters
The disconnect has produced a binary outcome in the market. With 38% of positions exposed, either direction leaves a significant segment on the wrong side. GDP and core PCE data due Thursday will redefine the interest rate outlook.
Technology shares provided the next drag. The PHLX semiconductor index declined by 2.2%, deepening its drop to 21% since the June 22 high, though it is still 63% higher since the start of the year.
Nvidia Corp. NASDAQ:NVDA dropped 5%, as Microsoft Corp. NASDAQ:MSFT rose 1.9%. The divergence indicates that investors are distinguishing between demand for AI and risks associated with AI funding.
Analysts project that S&P 500 earnings will climb 39% in the second quarter compared with the same period last year. Much of the increase is attributed to stocks related to artificial intelligence. The index is currently valued at about 20 times its expected future earnings.
Microsoft and Meta Platforms Inc. NASDAQ:META are scheduled to release results on Wednesday. Amazon.com Inc. NASDAQ:AMZN and Apple Inc. NASDAQ:AAPL will report later in the week. Investors will watch capital-spending guidance as closely as earnings.
Risks exist on both sides. Fresh hostilities between the U.S. and Iran may push oil prices higher again and boost inflation expectations. Conversely, if the Fed keeps rates steady and incoming PCE data comes in weaker, investors’ hawkish outlooks could be tempered.
The investor test now extends beyond oil. Monday demonstrated that lower oil prices are not enough to support equities while uncertainty over rates and AI expenditure continues. Wednesday will reveal if this gap continues.
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