Fed Day — 10-Year at 5%, Yardeni Cuts S&P to 7,900

TLTTIPHYGIEFSHY

What

The bond market arrives at the Fed’s September decision with the 10-year at 4.996%, having printed 5.008% on Tuesday morning after touching 5.00% on Monday for the first time since October 2023; the 30-year is 5.36%, the 5-year 4.83%, the three-month bill 3.96%. The move is across the curve and it is led by the long end, which is the shape of a market repricing the cost of money rather than the odds of one meeting. Ed Yardeni’s Tuesday note put the meeting in one number: the 2-year yield sits roughly 100 basis points above the federal funds rate, the widest gap since 2022. A 2-year that far above the policy rate is the market saying it expects the policy rate to keep rising toward it — that today’s quarter point, priced at about four in five, is the first of a sequence rather than a one-and-done. He also lowered the ‘normal’ range he has argued for the 10-year, 4% to 5%, into the frame of what sits above it: oil above $100 on the Middle East, the Treasury’s buybacks, the deficit, and a global bond sell-off that may be the carry trade unwinding as Japan tightens. His comfort is that the yield is still well below nominal GDP growth of 6.6%, and that the surge in the 10-year TIPS yield reads as growth, not fear — the same reading our Pulse gave on Tuesday from the credit tape.

If

The decision at 18:00 UTC comes with the projections and the dot plot; the 2-year’s reaction to the dots, not to the hike, is the tell. If the 2-year falls after the statement, the market has decided the cycle is shorter than it feared and the 10-year can come back under 5%; if the 2-year holds or rises with the 10-year through 5.00%, the curve is confirming a sequence.

Why

Every level on this page is a duration level now. The equity lines we carry — 757.83 on the S&P 500 ETF, 704 and 708.69 on the Nasdaq-100 fund, 505 on the chip ETF — were drawn in a market with a 10-year in the 4s; a 10-year that settles above 5% changes the multiple those levels were priced at, which is exactly the arithmetic behind Yardeni’s cut.

Then

We do nothing before 18:30. We keep 5.00% on the 10-year as the line, with the 2-year’s move after the statement as the reading of what kind of hike this was, and we treat a 10-year that closes above 5% on a hiking day as the first fact of October rather than the last fact of September.

Open the detail →

SPYRSPQQQ

What

Ed Yardeni’s ‘Proceed with Caution’ on Tuesday did three things a bull rarely does in one note. He lowered his year-end S&P 500 target from 8,400 to 7,900 and pushed 8,400 out to mid-2027, with the earnings number unchanged — $425 for 2027, against $419.53 from the analysts — and the multiple lowered from 19.8 to 18.6 because bond yields backed up. He cut the odds of his Roaring 2020s base case from 80% to 70% and raised a bearish outcome to 30%, while keeping the end-of-decade target at 10,000 and no recession through the decade. And he moved from ‘we will worry about a debt crisis when the bond market does’ to ‘we are starting to worry now’, on a 10-year he sees on the verge of breaking out above 5.00%. His mechanics are worth keeping: the range for the year is 7,225 to 8,500 on $425 of earnings at 17 to 20 times; 7,900 is 18.6 times, still inside it. His bond read is that oil above $100 — kept there, in his account, by the IRGC’s campaign against Gulf oil facilities ahead of the US midterms — makes a Fed hike the start of a cycle rather than a single move, and that the global sell-off in bonds may be the Japanese carry trade unwinding as the yen strengthens into a Bank of Japan hike on Friday. Treasury Secretary Bessent’s ‘global issues’ in his testimony on Tuesday, and his ‘I am the house now’ on 8 September, are the counterweight: buybacks financed by bills if the Bond Vigilantes run.

If

If the S&P 500 closes the week under 7,600 — about 2.5% below Tuesday — the market will have already priced most of Yardeni’s multiple cut; if it holds above 7,650, the cut is a forecast about the year, not a description of the week.

Why

Yardeni is the most-read bull on the street, and the shape of his cut matters more than the number: he did not touch earnings, he touched the multiple, and the multiple is a bond-market variable. That is the same arithmetic the AI trade has been doing since the weekend — not ‘does the compute get bought’ but ‘what is a dollar of 2027 earnings worth at 5% instead of 4.3%’ — applied to the whole index.

Then

We take the earnings-unchanged, multiple-lowered frame as the honest one for the week and carry 7,900 as an outside marker beside our own levels. We do not change the levels because a target changed; we change them when the tape does.

Yardeni Research, QuickTakes ‘Proceed with Caution’, 15 September 2026 →

SPYQQQDIAIWMRSPQQXTXLE

What

The index did what a rates day makes it do and then closed a little better than it traded. The S&P 500 ETF was under Thursday’s $757.83 from mid-morning to the last hour and finished at $758.83, down 0.3%, a dollar above the mark — so the first close under it since the sort began did not arrive, by a dollar. The Nasdaq-100 fund closed at $706.47, down 0.4%, above the 704 shelf and below Thursday’s $708.69; the Dow fund was down 0.5% at $521.99, the Russell 2000 fund down 0.5% at $285.60, the equal-weight S&P down 0.2%. The VIX closed 17.5, up 2%. Energy was the one sector bought — the energy sector fund +2.0% with Brent above $107.63 — and the Nasdaq-100 without technology fell 1.2%, which is the rate-sensitive half of that index being marked while the technology half was flat. The board’s message is the one we set at midday: a repricing of duration, not a sale — the small caps and the Dow leading down, the technology funds near flat, credit flat — and the futures this morning are +0.2%, which is a market waiting rather than one that has decided.

If

757.83 held by a dollar; a close under it tonight, on the decision, would be the first since the sort and would move the index from ‘flat while the AI trade sorts’ to ‘down with the long bond’. 704 on the Nasdaq-100 fund is the same test one floor down.

Why

The three lines were drawn as the range that resolves in October; a Fed hike into a 5% 10-year is the first event of that month arriving two weeks early. That the index held its line on the day the 10-year printed 5.008% says the market is still pricing the hike as known and the cycle as open.

Then

We keep 757.83 and 704 as the lines for tonight’s close and read them after 18:30, not before; a close under both on a day the 2-year rises is the combination that changes what we do.

Open the detail →