US stocks and Treasuries experienced a rally on September 17, 2026, driven by growing optimism that inflation can be kept under control. This positive sentiment emerged after the Federal Reserve raised interest rates for the first time in over three years and signaled further tightening. Falling oil prices, with US crude dropping below $100 per barrel and Brent crude to as low as $101, further supported the market's positive outlook. Early trading saw the S&P 500 up 1.2%, the Nasdaq Composite surge 1.6%, and the Dow Jones Industrial Average rise 0.9%, or 450 points.
The market's improved mood was also attributed to renewed confidence in the Federal Reserve and its chairman, Kevin Warsh. Investors applauded Warsh's firm stance against inflation, with analysts like Krishna Guha of Evercore ISI praising his "coherent, confident and consistently hawkish" press conference. ABN-AMRO economist Rogier Quaedvlieg noted that the Warsh Fed preserved its credibility by defying the Trump administration and following through on rate hike signals. Chris Zaccarelli, CIO of Northlight Asset Management, commented that Warsh "threaded the needle very well."
Despite the rally, some analysts caution against buying the dip. Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities, warned that the "supply/demand setup into month-end remains unfavorable" and that equities could trade lower in the next two weeks. JPMorgan's trading desk maintained a "Tactically Cautious/Neutral" view, indicating that while lower oil and bond yields could shift their outlook to bullish, timing remains uncertain and positioning suggests potential downside.
While market optimism was boosted by declining oil prices, which were partly attributed to reports that President Donald Trump would discuss the Iran war with Gulf leaders and progress in restoring Saudi Arabia's East-West pipeline capacity, oil prices remain significantly elevated. US and Brent crude are both more than 65% higher than at the start of the year. Additionally, retail gasoline prices climbed by $0.07 to $4.43 per gallon, and diesel prices jumped $0.08 to $6.39 per gallon. Furthermore, the Bank of Japan is expected to raise rates, which could impact global bond markets.
The rally in stocks was accompanied by a rally in bonds, leading to lower Treasury yields. The 10-year US Treasury yield declined to 4.96% after touching 5.02% the previous day, and the 30-year yield fell to 5.31% from 5.36%. This was also aided by the Bank of England's decision not to raise interest rates and to cancel plans for selling longer-dated bonds. Contracts on the S&P 500 Index were up 0.8% and Nasdaq 100 futures climbed 1.1% in early trading, following Wednesday's sell-off.
