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President Trump and President Xi Jinping at the White House during their September 24, 2026 summit
Photo: Finance Feeds

S&P 500 Falls 0.7% as December Rate-Hike Odds Near 80%, PCE Due

Reuters2 min read10 sources

Why is the S&P 500 falling this week?

The S&P 500 (SPX) has slipped 0.7% this September, sitting near 7,743, as 30-year Treasury yields hit 5.44%, a 22-year high, and Wednesday's August PCE inflation data could cement more Fed rate hikes.

Key numbers

30-year Treasury yield5.44%Highest since June 2004
December 2026 rate-hike odds79.6% (per [5])Up from ~30% on Aug 17
August core PCE consensus (MoM)0.3%+0.1pp vs July 2026 print
S&P 500 September MTD return-0.7%8 of 11 sectors negative for month
Fed funds target rate3.75%-4.00%+25bp on Sept 16, first hike since 2023
10-year Treasury yield5.21%Highest since 2007

What happened

The S&P 500 (SPX) has slipped 0.7% this September, sitting near 7,743, as 30-year Treasury yields hit 5.44%, a 22-year high, and Wednesday's August PCE inflation data could cement more Fed rate hikes. The Federal Reserve raised its benchmark rate to 3.75%-4.00% on September 16 — its first hike since 2023 — and markets now price roughly an 80% chance of a December move (per). A brief relief rally on Friday, after President Trump and China's President Xi Jinping extended their trade truce at a White House summit, lifted the S&P 500 by 0.5% but did not ease the underlying pressure from rising bond yields. Goldman Sachs projects August core PCE at 0.26% but warns that a print at or above 0.3% would be the week's make-or-break Fed catalyst.

Why it matters

The S&P 500 is being squeezed by the highest long-term borrowing costs in two decades — when 30-year Treasury yields top 5%, mortgages get more expensive, corporate borrowing costs rise, and investors start favoring safer bonds over growth stocks. The Fed paused rate hikes for most of 2024-2025, and a brief return to that pause was what markets hoped the Trump-Xi summit might deliver. If Wednesday's PCE number comes in hot, that hope closes: October and December rate hikes lock in, and the stock market could take another leg lower.

Who this affects

Marketbearish
High impact
Broad equity markets face selling pressure ahead of PCE.
Companybearish
High impact
Large-cap growth stock valuations compress as yields rise.
Competitorsbullish
Medium impact
Bonds and money-market funds gain appeal over equities.
Industrymixed
Medium impact
Financials may benefit; utilities, REITs, and growth tech face headwinds.

S&P 500 vs Nasdaq Composite, Dow Jones, Russell 2000

S&P 500SPX7,743+0.5%-0.7%+13.1%
Nasdaq CompositeCOMP27,069+0.5%-0.8%+16.5%
Dow Jones Industrial AverageDJIA51,829+0.9%-1.7%+7.8%
Russell 2000RUT2,838+0.1%-2.7%+14.3%

As of 2026-09-25

How we got here

  1. August CPI beats at 0.3% MoM; banks lift core PCE forecasts.

  2. Fed hikes 25bp to 3.75%-4.00%; first increase since 2023.

  3. 30-year yield hits 5.501%, highest since June 2004; Trump-Xi summit at White House.

  4. S&P 500 gains 0.5% on relief rally; VIX drops to 14.87 (per).

  5. August PCE due; above 0.3% MoM would cement October Fed hike.

What to watch

  • August core PCE: above 0.3% MoM would cement October 28 Fed hike.2026-09-30
  • October 28 FOMC: hike probability at 65.4%; watch for pre-meeting Fed speakers (per).2026-10-28
  • September payrolls: second labor and inflation test for the Fed's rate path.2026-10-03

Educational content only. Not investment advice.

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