Dow Falls 1.5% in Third Straight Weekly Loss, as Feds First Rate Hike Since 2023 Rattles Markets

Mumbai, Sept 19: US equities ended the week mixed after the Fed raised rates by 25 basis points to 3.75%–4.00%, signalling further tightening. The Dow fell 1.5%, marking Dow’s third straight weekly decline, while the S&P 500 fell 0.3% and the Nasdaq rose 0.3%. The 10-year Treasury yield briefly topped 5%, its highest level since 2007. A Thursday rebound, driven by oil prices and easing yields, limited broader losses. 

Dow Falls 1.5% as Bank Selling and Industrial Weakness Drag Blue‑Chip Stocks 

The Dow Jones Industrial Average ended the week at 51,603.46, down 795.25 points or1.5%. This marks the consecutive week of losses, with the total decline now standing at 3.6%. The index moved between 52,600 and 51,461.90 during the week, showing increased market volatility. This movement came after the Federal Reserve’s interest rate decision, which stirred uncertainty among investors. 

Also Read: What Is the New York Stock Exchange (NYSE)?  

Financial stocks were among the main drags after Bank of America disclosed flat third-quarter trading revenue at a 14 September conference, triggering broader selling across major banks. Apple also declined despite the launch of iPhone 18 sales, while Salesforce struggled to sustain gains following its Dreamforce conference and new AI product announcements. Only seven of the 30 Dow components finished higher on Friday, highlighting narrow market leadership. 

S&P 500 Slips 0.3% as Nine Sectors Decline Despite Technology Rebound 

The S&P 500 ended at 7,628.84, down 19.22 points or 0.3% for the week. The index moved between approximately 7,660 and 7,551.81, with Wednesday’s weakness following the Fed decision offset by a strong technology-led rebound later in the week. 

The decline remained broad, with nine of 11 sectors ending lower. Materials fell around 1.3%–1.4%, pressured by higher Treasury yields and a stronger dollar, while financials weakened amid bank selling. Technology provided the strongest support, gaining 2.2% on Thursday, while consumer discretionary rose 1.43% and utilities advanced 0.86%. The sector divergence reflected shifting investor interest towards growth-oriented areas as rates remained elevated. 

Nasdaq Gains 0.3% as 1.7% Thursday Surge Offsets Fed Rate Pressure 

The Nasdaq Composite closed at 26,417.95, gaining 85.26 points or 0.3% for the week. The index touched a weekly low near 25,978.42 before rebounding sharply, with Thursday delivering a 1.7% gain, its strongest single-day advance since early September. 

The rebound was led by semiconductors, which jumped 3.1%, supported by continued demand expectations for AI infrastructure and data-centre investment. AI sentiment remained a major market driver despite an early-week selloff in AI infrastructure stocks. Lower Treasury yields on Thursday also supported growth shares, although the 10-year yield moving back above 5% on Friday limited further gains. The Nasdaq therefore remained caught between strong AI demand expectations and valuation pressure from higher interest rates. 

Russell 2000: Small Caps Lag Broader Market with 1% Weekly Decline 

The Russell 2000 closed at approximately 2,874.63, down 29.31 points, or 1%, from the previous week. The index touched a weekly low of 2,858.81 on Wednesday, underperforming the S&P 500 and Nasdaq. Small caps remained sensitive to higher interest rates because of greater debt exposure and dependence on domestic economic conditions. The 2-year Treasury yield reached 4.744%, its highest since July 2024, tightening financial conditions after the Fed’s hawkish stance. Strong August retail sales supported economic expectations, but rising yields continued to pressure smaller companies.

Mega-Cap Strength Cushions Decline with 0.3% Weekly Drop 

The S&P 100 declined approximately 0.3%, outperforming the broader S&P 500 as mega-cap technology stocks provided stability. The Roundhill Magnificent Seven ETF (MAGS) gained more than 1%, extending its fourth consecutive weekly advance. Strong balance sheets, cash flows and continued AI investment expectations supported mega-cap growth stocks despite higher rates. This reflected continued investor preference for large technology companies amid tighter financial conditions. 

Dow Jones Composite, Transportation and Utility Averages: Transports Slide 3% as Fuel Costs Bite 

The Dow Jones Transportation Average fell nearly 3% on Wednesday, with companies such as J.B. Hunt pressured by elevated diesel prices and concerns over operating margins. Meanwhile, the Dow Jones Utility Average stood at 1,048.43 on 16 September, down 1.01%, as rising Treasury yields reduced the relative appeal of dividend-paying utilities. Higher energy costs and bond yields therefore weighed across transportation and utility sectors. 

Philadelphia Semiconductor Index (SOX): Chips Surge 3.1% on Thursday in Sharp Reversal 

The SOX closed at 11,599.49, below the previous week’s approximately 11,824.00, but surged 3.1% on Thursday as AI-related chip demand revived buying interest. The index also advanced for a fourth consecutive session on Friday. Strong AI data-centre investment expectations supported semiconductor sentiment, although tariffs, trade developments and Treasury yields continued to drive volatility. 

NYSE Composite Index: Broad Market Participation Lags Nasdaq 

The NYSE Composite ended at approximately 24,089.55, down 0.65%, reflecting weakness across financial, materials and industrial stocks. Market breadth remained weaker than the Nasdaq, where technology and semiconductor shares provided leadership. With 10 of 11 S&P sectors lower and only seven Dow components higher on Friday, index performance remained concentrated in technology-led stocks. 

S&P MidCap 400 and S&P SmallCap 600: Domestic Cyclicals Underperform as Rates Rise 

The S&P MidCap 400 and S&P SmallCap 600 each fell around 1%, with smaller domestic cyclicals particularly exposed to tighter financial conditions. Stronger retail sales provided some economic support, but the Fed’s rate hike increased borrowing costs and reduced risk appetite. Investors continued favouring large-cap technology and mega-cap growth, leaving small- and mid-cap participation comparatively weak. 

Fed Tightening, Surging Yields and Falling Oil Prices Trigger Market Rotation 

The Federal Reserve’s first rate hike in three years on 16 September was the dominant catalyst, with the FOMC raising rates by 25 basis points to 3.75%–4.00% in a unanimous 12–0 vote. The Fed’s statement stressed that inflation remains elevated and that policy would continue targeting price stability. Markets interpreted the decision as hawkish, with pricing indicating a 90% probability of another hike by December. The Dow fell 1.2% on the day. 

Stronger-than-expected retail sales reinforced expectations for tighter policy. August retail sales increased 1.2% month-on-month to $773.9 billion, exceeding the 0.8% forecast after July’s revised 0.5% decline. The resilience of consumer spending supported economic growth but reduced expectations for near-term rate cuts. 

Treasury yields surged, with the 10-year yield reaching 5.04%, its highest level since 2007, before ending at 4.95%. The 2-year yield touched 4.744%, while the 30-year yield reached 5.333%. Higher yields pressured rate-sensitive sectors including utilities, real estate and consumer staples, while financials received some margin support despite bank-specific weakness. 

Also Read: How to invest in US stocks 

Oil prices reversed lower, providing late-week relief for equities. Brent crude settled at $103.87, down 0.71%, while WTI traded below $100. Saudi Arabia’s steps to resume East-West pipeline flows eased supply concerns, helping reduce inflation pressures and supporting Thursday’s equity rebound. 

The Bank of Japan’s 25-basis-point rate hike to 1.25%, a 31-year high, reinforced the global tightening narrative. The move strengthened expectations for a higher-for-longer interest-rate environment, supporting the US dollar while adding pressure to commodities and rate-sensitive assets. 

VIX Plunges 12.9% to 15.42 as Fed Uncertainty Clears 

The CBOE Volatility Index (VIX) opened the week near 17.70 and closed at 15.42 on Friday, a decline of approximately 12.9%. The weekly high was approximately 17.91, touched earlier in the week ahead of the FOMC decision.  

The weekly low was 15.42. The VIX’s sharp decline on Thursday and Friday indicates that investor demand for protection diminished significantly once the Fed decision was delivered, removing a major source of uncertainty. The VIX 1-Day finished at 13, reflecting extremely low near-term volatility expectations.  

Also Read: US Stock Market Timings 

The VIX has averaged 18 points this year, approximately 9% below the 2019–2025 average, suggesting that volatility expectations remain structurally contained despite the hawkish Fed shift. 

S&P 500 Sector Performance: Technology Gains 2.2% as Materials Fall 1.3% 

Information Technology gained 2.2% on Thursday, the sector’s strongest single-day performance of the week, driven by the semiconductor rebound and AI-related investment sentiment. Communication Services declined modestly as Alphabet and Meta Platforms traded mixed amid the broader growth-stock rotation. Consumer Discretionary rose 1.43% on Thursday, supported by Amazon and Tesla as falling oil prices eased consumer cost concerns. Consumer Staples declined slightly as defensive positioning unwound.  

Financials fell into oversold territory, with the sector declining 1.62% on Wednesday as bank stocks sold off following the Bank of America trading revenue disclosure. Health Care declined modestly, with no major sector-specific catalyst. Industrials fell as transportation stocks declined nearly 3% on Wednesday amid record diesel prices.  

Also Read: What Are Fractional Shares? 

Energy declined as Brent crude fell 0.71% for the week, its first weekly loss in three weeks. Utilities rose 0.86% on Thursday but declined earlier in the week as Treasury yields surged. Real Estate declined as rising rates pressured REIT valuations. Materials led weekly losses with a 1.3% to 1.4% decline, pressured by the stronger dollar and rising yields. 

The sector with the largest weekly gain was Information Technology, while the sector with the largest weekly decline was Materials. The key rotation theme was growth versus value, with technology and consumer discretionary outperforming while financials, materials and energy lagged. Rate-sensitive sectors including utilities and real estate faced headwinds from surging Treasury yields, while energy stocks tracked crude oil prices lower. 

Biggest Gainers, Losers and Magnificent Seven Performance 

Notable weekly gainers among major index constituents included Nvidia, which rose approximately 3% as semiconductor stocks rebounded on Thursday and Friday; Microsoft, which gained approximately 2% on AI-related sentiment; Amazon, which rose approximately 2% on falling oil prices and consumer discretionary strength; Meta Platforms, which gained approximately 1.5%; and Apple, which advanced approximately 1% despite beginning iPhone 18 sales. Tesla rose approximately 1% as falling oil prices supported electric vehicle sentiment. Alphabet gained approximately 0.5%. 

Notable weekly losers included Bank of America, which declined approximately 4% following the trading revenue disclosure and broader financial sector weakness; JPMorgan Chase, which fell approximately 3% in sympathy with bank sector declines; J.B. Hunt, which dropped approximately 5% as record diesel prices pressured transportation margins; Caterpillar, which declined approximately 2% on industrial sector weakness; and Goldman Sachs, which fell approximately 3% amid financial sector rotation. 

Also Read: What Is the S&P 500? A Simple Guide for Everyday Investors 

The Magnificent Seven collectively rose approximately 1% for the week, as measured by the Roundhill Magnificent Seven ETF (MAGS) , marking the group’s fourth consecutive weekly gain. The mega-cap technology trend remains a critical support for the major indices, with the Magnificent Seven materially influencing the Nasdaq and S&P 500. Nvidia, Microsoft and Amazon were the largest positive contributors, while Apple and Alphabet provided modest gains. The Magnificent Seven’s relative strength helped the Nasdaq Composite post a positive weekly return while the broader market declined. 

SOX Falls 1.9% as Higher Yields Pressure AI, Financial, Energy and Growth Stocks 

Semiconductor stocks declined 1.9%, with the SOX Index falling from 11,824 to 11,599.49, despite a 3.1% Thursday rebound, as higher Treasury yields, interest rates and trade risks pressured valuations. Financial stocks weakened amid uncertain credit conditions, while Bank of America’s flat trading revenue triggered broader bank selling. Energy stocks fell as Brent declined 0.71% to $103.87 and WTI slipped below $100, following easing supply concerns after Saudi Arabia’s pipeline-flow measures.  

Meanwhile, AI and growth stocks posted mixed performance, with the Nasdaq gaining 0.3% as mega-cap technology and semiconductor strength provided support. Thursday’s decline in Treasury yields briefly boosted rate-sensitive shares, but the 10-year yield returning above 5% limited gains and maintained pressure on high-multiple growth stocks. 

Retail Sales Surge 1.2% as Inflation Remains Elevated 

The week’s economic data reinforced expectations for tighter US monetary policy. August retail sales rose 1.2% month-on-month to $773.9 billion, beating the 0.8% forecast and highlighting resilient consumer spending. Initial jobless claims fell to 196,000 for the week ending 12 September, below the 209,000 consensus and marking the lowest level since mid-July, signalling continued labour-market strength.  

Meanwhile, August CPI increased 0.4% month-on-month, with annual inflation holding at 3.4%. Core CPI rose 0.3%, exceeding the 0.2% expectation and keeping underlying price pressures elevated. August PPI also climbed 0.4% month-on-month and 5.4% year-on-year, its highest annual rate of 2026.  

Core PPI increased 4.6% year-on-year, while diesel fuel prices surged 24.1%, highlighting energy-related cost pressures. Together, resilient consumer demand, firm employment conditions and persistent inflation provided further support for the Federal Reserve’s hawkish policy stance during its September meeting. 

Fed Raises Rates 25 Basis Points as 10-Year Treasury Yield Hits 5.04% 

The Federal Reserve delivered its first rate hike in three years on 16 September, lifting the federal funds target range by 25 basis points to 3.75%–4.00% in a unanimous 12–0 vote. The Fed said inflation remains elevated, reinforcing expectations of further tightening, while market pricing indicated 90% odds of another hike by December and 55% by October.  

Treasury yields moved higher overall, with the 2-year yield rising 9 basis points to 4.744%, the 5-year yield gaining 7 basis points to 4.82%, and the 30-year yield increasing 2.5 basis points to 5.305%. The 10-year yield ended at 4.95% after reaching 5.04%, its highest since 2007.  

The yield curve steepened, while Thursday’s retreat in the 10-year yield supported equities. However, elevated yields continued to pressure growth and technology valuations, although AI-related earnings expectations provided some support. 

Oil Falls 3.62% While Dollar Surges Above 100 Amid Global Monetary Tightening 

Brent crude ended the week at $103.87, down 0.71%, while WTI fell 3.62% to below $100, pressured by easing supply concerns and weaker demand expectations. Gold gained 0.45% to $4,385.90, supported by lower oil prices and easing inflation concerns, while silver rose 2.64% to $66.21. Copper remained near $6.545 per pound, backed by resilient growth and electrification demand.  

Natural gas climbed 2.86% to $2.912. The DXY rose over 1% to around 100.30–100.40, supported by the Fed’s hawkish stance and higher Treasury yields. EUR/USD slipped to 1.14755, while USD/JPY ended near 156.055. GBP/USD weakened as the Bank of England held rates steady and maintained cautious guidance.The Fed’s first rate hike since 2023 has reset the rate narrative, with markets pricing a 55% chance of another increase in October and 90% odds by December.  

The 10-year Treasury yield’s battle with the 5% level remains the key variable for equity valuations, particularly for rate-sensitive sectors. Oil price volatility and global central bank tightening will continue to influence inflation expectations and sector rotation. Investors should monitor Fed speakers, Treasury yield movements and crude supply developments in the coming week for signals on market direction. 

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