WSJ: U.S. stocks rebound as market prices in Fed rate hike expectations, 10-year U.S. Treasury yield nears 5%.

After US August CPI data came in slightly above expectations, markets largely confirmed the Federal Reserve would raise interest rates next week — a development that instead sparked a Friday rebound in US stocks. Investors view the clear rate hike path as helping reduce policy uncertainty and avoiding more aggressive rate hike expectations down the line. The S&P 500 rose 0.9% on Friday, the Dow Jones gained around 1%, and the Nasdaq climbed 1%, though all three major indexes ended the week lower overall. Meanwhile, the 10-year US Treasury yield closed at 4.974%, near the 5% threshold, a notable jump from 4.783% a week earlier. Markets now expect the Fed to raise rates by 25 basis points at next week’s meeting. RBC Capital Markets has even shifted its forecast for rate cuts this year to three rate hikes, noting that high interest rates could further weigh on corporate earnings and stock valuations. The energy market also remained under pressure: Brent crude closed at $104.61 per barrel on Friday, up more than 8% for the week. Houthi attacks on Saudi energy facilities, shipping risks in the Strait of Hormuz, and Saudi Arabia’s shutdown of east-west oil pipelines have all amplified supply concerns. While market sentiment improved somewhat on Friday, the simultaneous presence of high oil prices and elevated interest rates means US stocks could remain highly volatile going forward. Wall Street’s core question has now shifted from “whether the Fed will raise rates” to “how long high interest rates will persist, and whether they can curb inflation without harming the economy and corporate earnings.”