Hike Odds Climb Past 60% and US Crude Slides Under $90 as the Tape Splits After Payrolls

by Tomas Ferreira · September 4, 2026

Markets Reporter, US Market Current

A payroll number several times larger than forecast did what such numbers usually do to a front-end-driven market: it moved the two-year Treasury yield and left the long end largely where it was. The repricing on Friday morning was a policy repricing, not a growth-scare repricing, and the split showed up across the tape.

The equity reaction was ambivalent rather than ugly. The Associated Press reported that the S&P 500 slipped 0.1% in morning trading and that the Dow Jones Industrial Average was down 211 points, or 0.4%, as of 10:05 a.m. Eastern time, with the Nasdaq composite edging up 0.1%. US markets were still open as this was written, so none of those are closing figures and all of them can change before the bell.

The contrast with Thursday is what makes the morning interesting. According to a market review of the Sept. 3 session, the Dow closed up 623.57 points, or 1.18%, at 53,685; the S&P 500 rose 81.00 points, or 1.06%, to 7,747; the Nasdaq gained 366.23 points, or 1.40%, to 26,584; and the Russell 2000 added 15.11 points, or 0.51%, to 2,968. That was a broad, high-conviction rally. Friday morning has been narrower and more equivocal.

In rates, the move was concentrated exactly where a policy surprise belongs. The AP reported that the yield on the two-year Treasury, which closely tracks expectations for Federal Reserve moves, rose to 4.37% from 4.34% late Thursday, while the 10-year yield, which influences mortgage rates, held steady at 4.77%. The same Sept. 3 session review put the 10-year at 4.77%, down 0.022 on Thursday. Those are AP's morning figures; other accounts taken later in the session had the 10-year modestly higher, so the "steady" reading is a snapshot rather than a settled level.

If that combination holds through the session it is a readable one. A higher policy rate expected sooner lifts the front end; a long end that does not follow would suggest investors are pricing tighter policy in the near term without materially changing their view of long-run growth or the terminal rate. On the morning's figures the long end was, unusually, the quiet part of the curve, though with hours of trading left that is a provisional reading.

The probability numbers themselves moved sharply. The AP reported that expectations for a September rate hike increased to 60.2% on Friday following the release of the jobs report, up from 49.4% Thursday and from 57% a week ago, according to CME FedWatch. Reuters, citing short-term interest-rate futures rather than FedWatch, put the implied chance of an increase at the Sept. 15-16 meeting at about 65%, up from about 55% before the employment report. The two are drawn from different instruments against different baselines, and both are point-in-time readings from a market that has been repricing continuously since 8:30 a.m. Neither should be read as a settled level.

It is worth being precise about direction, because it has flipped more than once this year. The pricing now sits on the side of a September increase, not a cut. The direction is consistent, but the level has been unstable: on the AP's own CME FedWatch figures, the same probability was 57% a week ago and 49.4% as recently as Thursday, so a move of more than ten points in a single session is a reminder of how thinly held the conviction is.

The near-term calendar gives that pricing one more test before the decision. According to the Bureau of Labor Statistics release schedule, the August Consumer Price Index is due at 8:30 a.m. on Sept. 11. Reuters placed the Federal Open Market Committee's next meeting on Sept. 15-16, which puts the inflation print four days ahead of the first day of the meeting.

Federal Reserve governor Christopher Waller framed the sequence explicitly. The AP reported that Waller said if new data next week shows inflation is cooling, he "would be inclined" to keep the Fed's benchmark interest rate unchanged, and that he would consider a rate increase if the data instead point to hotter inflation. The Sept. 3 market review credited Waller's dovish remarks that day with supporting gains in gold and helping equities hold their strength through the session, which makes his conditional framing on Friday a live variable rather than boilerplate.

Sell-side reaction to the payroll data was blunt. Stephen Brown of Capital Economics told Reuters that "Even the most committed dove would struggle to find anything in the August employment report to justify keeping interest rates unchanged." Jeffrey Roach, chief economist at LPL Financial, suggested to the same wire that a rate hike may generate less market volatility than another meeting in which policymakers choose to stand pat.

Energy gave back a slice of a strong week. The AP reported that in energy trading benchmark US crude declined 2.6% to $88.96 a barrel and that Brent crude, the international standard, fell 2.2% to $93.44, adding that both were still up sharply on the week, rising 8% to 9%. Those are trading levels from the same open session, not settlements. The move takes the US benchmark back below $90 after the Sept. 3 review put it at $91.30, up 29 cents, on Thursday, and pulls Brent back under the $95.52 the same review recorded for Thursday's close.

The refined-products picture did not follow crude down on the day. Diesel "hit an all-time high for any time of the year on Friday, soaring to an average of $5.85 a gallon," the AP reported, attributing the move to the six-month war with Iran disrupting the world's flow of fuel. That keeps a cost line under freight and industrial users even as the front-month crude contract slides.

The mortgage market has already absorbed part of the yield move. Reuters reported that rising yields drove the 30-year fixed mortgage rate to a more than one-year high of 6.71% this week. That number sits downstream of a 10-year yield that has spent the week near multi-year highs, and it is the channel through which the long end reaches households most directly.

Gold, which had been a notable Thursday winner, is worth flagging for context rather than for Friday levels: the Sept. 3 review put it at $4,539.90, up $125.30 or 2.84%, on the back of dovish Fed commentary. A morning in which hike odds rose is an obvious test of that trade, but no timestamped Friday level was available as this was written.

Overseas trading offered no strong steer, with markets mixed in Europe and Asia, according to the AP.

US markets are closed Monday for Labor Day, so Friday's close will stand until Tuesday, Sept. 8. That leaves a three-day gap between the last equity print of the week and the first opportunity to react to anything that happens over the weekend, with the CPI report landing three days after markets reopen.