Markets End Week Little Changed Amid Rate Hikes and Inflation Risks

The past week in financial markets saw two significant reversals and shifts in investor sentiment. The S&P 500 added 0.1%, the Nasdaq Composite rose 0.4%, and the Dow Jones Industrial Average fell 0.3%. Behind these flat indexes, there were two swings in direction and a notable change in market structure.

The week started with a historically weak September mood, escalating tensions in the Middle East, expensive oil, and inflation risks. The initial reaction was defensive positioning, rising short interest, and heightened sensitivity to data. However, verbal interventions by Fed officials, particularly New York Fed President John Williams, cut the hike probability from 65% to roughly 50%. This led to a short squeeze on Thursday.

The strong jobs report on September 4 further reduced the case for easing but did not show fresh wage overheating. The reaction fit was mild, with the S&P 500 falling 0.38% and the Nasdaq 0.29%. The probability of at least one hike by year-end reached 71.5%, while rates globally continued to rise.

Oil prices ended the week at $92.68 (Brent) and $91.48 (WTI), but the actual shortage lies in refining capacity and diesel availability, not crude. The market's response was an inflationary impulse with a lag, feeding into core inflation via transport and production costs.

Crypto markets saw inflows return sharply, with bitcoin moving from $76,200 to $79,766. Total market capitalization reached $2.7 trillion with $67.4 billion in trading volume. The Fear and Greed Index stood at 75, and the Altseason Index was 40 out of 100.

Exchange-traded crypto funds saw net inflows of +$1.238 billion for the week, +$5.745 billion for the month, and +$4.164 billion for the quarter. The market's intraweek reversal mirrored equities, with selling on Tuesday, a strong reversal on Thursday, and follow-through on Friday.