Oil Prices Retreat as Fed Interest Rate Hike Expectations Rise

Wall Street ticked up on Friday after a volatile week, but investors are still bracing for a possible interest rate hike from the Federal Reserve next week. The Consumer Price Index (CPI) increased 0.4% last month, pushing expectations of a quarter-point hike to around 85%. Oil prices retreated from a four-month high, but Brent crude was still up 2.9% at $104.49 after hitting $109.97 earlier in the day.

Shawn Snyder, economic strategist at Potomac Fund Management, said the CPI report 'may not be enough to definitively push the Fed to hike rates at its September meeting, but with oil prices hovering around $100 a barrel, it is hard to envision the inflation outlook getting much better in the near term.' The Dow Jones Industrial Average rose 1.13%, the S&P 500 gained 1.03%, and the Nasdaq Composite was up 1.15%.

The Fed's two-day meeting next week will be closely watched, with Chairman Kevin Warsh set to deliver a press conference on Wednesday. Meanwhile, bond yields remained elevated, with the benchmark 10-year Treasury yield touching its highest in almost three years at 4.9915% immediately after the inflation data.