In a column for ForkLog, trader and author of the Coen+ Telegram channel, Vladimir Koen, analyzes how shifts in expectations regarding the Federal Reserve's interest rates, rising yields, and fuel prices have impacted the markets while a surge in crypto funds supported Bitcoin following an intra-week reversal.

Financial Markets: August 31 – September 4, 2026.

The major indices ended the week nearly unchanged: the S&P 500 rose by 0.1%, the Nasdaq Composite increased by 0.4%, while the Dow Jones Industrial Average fell by 0.3%. Beneath this flat surface, two directional shifts occurred alongside a notable change in the internal market structure.

Futures market heat map. Source: Finviz.

Shifting Rate Expectations

The week began with a typical September sentiment: historically a weak month for markets, marked by escalating tensions in the Middle East, high oil prices, and inflationary risks. The response was predictable: a defensive positioning, an increase in short positions, and heightened sensitivity to economic statistics.

The trajectory of the probability for a September rate hike was as follows:

  • A hawkish impulse following comments from Federal Reserve Chair Kevin Warsh at Jackson Hole raised the probability to 65%;
  • Verbal interventions from Fed Governor Christopher Waller and New York Fed President John Williams brought it down to about 50%, resulting in a short squeeze on Thursday;
  • A strong employment report on September 4 pushed the probability back up to 63%.

Employment increased by 162,000, surpassing expectations of 45,000-55,000, while the unemployment rate held at 4.1%. The July figure was revised from negative to positive territory.

A key point: the report eliminated arguments for easing but did not indicate significant wage overheating. This represented more of a cancellation of dovish hopes than a hawkish shock.

The market reacted accordingly: on Friday, the S&P 500 fell by 0.38%, and the Nasdaq decreased by 0.29%.

The probability of at least one rate hike by the end of the year reached 71.5%.

Global Pressure on Rates

The yield on 10-year U.S. Treasury bonds fluctuated between 4.75% and 4.80%, while 30-year yields exceeded 5.2%.

At the same time, yields on German, British, and especially Japanese bonds also increased. Thus, the situation can no longer be viewed solely as an American issue.

The market is globally reassessing three factors: the term premium, levels of government borrowing, and the neutral rate level.

The primary divergence for the week: the likelihood of a rate hike is increasing, yields are rising, yet the dollar index remains below 100.

The dollar does not confirm the extent of movement in the bond market. In my view, participants are anticipating a targeted tightening but are not yet pricing in the onset of a new rate hike cycle. These are different scenarios.

Oil: Shortage Not in Crude

Brent closed the week at $92.68 (+7.6%), while WTI ended at $91.48 (+10%).

However, the price per barrel does not reflect the main issue. According to the U.S. Energy Information Administration:

  • Oil inventories fell by 4.5 million barrels;
  • Gasoline stocks decreased by 1.2 million barrels;
  • Distillate inventories stood at 104.2 million barrels, which is 14% below the five-year average;
  • Refinery utilization rates hit 98%;
  • Fuel product deliveries over four weeks dropped by 4% year-over-year.

This combination is atypical: demand is not overheated, yet refineries are operating at near physical limits, and fuel supplies remain low. Thus, the current bottleneck lies not in crude oil but in refining capacity and the availability of diesel fuel.

American diesel reached a record high of $5.85 per gallon, while European crack spreads exceeded $100 per barrel.

This presents an inflationary impulse with a lag. It permeates core inflation through transportation costs and production expenses and may persist even after oil prices stabilize.

Gold: Rates Overpowering Fear

Over the week, gold prices fell by 3.5%, from $4601 to $4438, amid escalating military tensions.

The mechanics appear as follows: rising tensions push oil prices higher, expensive oil supports real yields, and increasing yields pressure gold.

Consequently, the effect of interest rates has proven stronger than the demand for safe-haven assets. As long as real yields are rising, international tensions alone are insufficient to drive gold prices up.

Stocks: Index Holds, Structure Changes

The semiconductor sector outperformed the broader market. Some software companies and growth stocks in the consumer segment faced pressure.

Futures market heat map. Source: Finviz.

On Friday, the SOX index gained 3.4% against a backdrop of declining broad indices. This is beginning to resemble less of a typical rotation and more of a market stratification.

At the same time, capital outflow continues:

  • U.S. equity funds experienced an outflow of $11.1 billion for the week ending September 2, compared to $22.7 billion the previous week;
  • Money market funds saw inflows of $48.8 billion;
  • Short- and mid-term government bonds attracted $4.5 billion.

Old capital is maintaining its positions, while new money is primarily flowing into cash and short-term debt.

Cryptocurrencies: Sharp Inflows Return

Bitcoin's price fluctuated from $76,200 to $82,200, closing at $79,766.

Week's closing prices were as follows:

  • Bitcoin — $79,766 (+0.44%);
  • Ethereum — $2461 (+0.34%);
  • BNB — $766.30 (+6.99%);
  • Solana — $103.27 (+1.68%);
  • XRP — $1.4176 (+0.44%).

The total market capitalization reached $2.7 trillion with a trading volume of $67.4 billion.

Bitcoin dominance hit 59.4%, Ethereum at 11.1%, while other assets accounted for 29.5%.

The Fear and Greed Index stood at 75, indicating greed, while the Altseason Index was at 40 out of 100. A full-fledged altcoin season has yet to commence, with main capital remaining in the top tier.

The open interest for perpetual contracts was $408.59 billion, while for futures it was $2.37 billion.

The implied volatility for Bitcoin reached 39.32, while for Ethereum it was at 52.84. The leading altcoin is trading with a volatility premium due to relative price weakness, indicating higher demand for hedging in this asset.

The main change of the week occurred in the flows of exchange-traded crypto funds:

  • August 27 — +$540 million;
  • August 31 — +$310 million;
  • September 1 — −$194.4 million;
  • September 2 — +$60 million;
  • September 3 — +$820 million;
  • September 4 — +$205.8 million.

On September 4, Bitcoin saw +$174.6 million, Ethereum +$25.9 million, HYPE +$10.5 million. Solana recorded an outflow of $5.2 million, while XRP had no change.

Total flows amounted to +$1.238 billion for the week, +$5.745 billion for the month, and +$4.164 billion for the quarter. The combined assets of crypto funds reached $122.57 billion across 32 products from 11 issuers.

Source: CoinGlass.

The intra-week reversal mirrored the stock market: selling on Tuesday, a strong reversal on Thursday, and consolidation on Friday.

Why the Decline Was Mild

For me, this is the key to the entire week:

  1. The market entered the week with a defensive tilt: accumulated short positions, purchased hedges, and heightened sensitivity to news.
  2. A series of verbal interventions on Wednesday and Thursday reduced the probability of a rate hike from about 65% to 50%. Short positions began to close, which intensified the growth on Thursday.
  3. By Friday, a significant portion of shorts had already been closed, but hedges remained in place ahead of the employment data release.
  4. The report turned out strong. However, much of the speculative overhang had disappeared the day before, and the retained hedges softened the movement.

As a result, the market declined, but from higher levels and with relatively contained volatility. Positioning and protective structures partially absorbed the blow in advance.

The Timing Puzzle

Before the release of the data on September 4, an unusually dense series of public statements was made by representatives of the Federal Reserve, Commerce Secretary Howard Latnik, Treasury Secretary, and President Donald Trump.

This was not a single speech but a series right before the report.

In my opinion, such a sequence seems intentional. Administration representatives may have anticipated the data's direction and prepared the market by softening rate hike expectations before the release.

The result was a strong short squeeze against a backdrop of general September pessimism. By the time negative data for stocks was released, the market was already significantly less vulnerable in terms of positioning.

The sequence appears cohesive: a series of interventions → shift in expectations → closing of short positions → a milder reaction to strong data.

The closer we get to the elections, the more of these interventions we are likely to see. The battle for managing expectations is already intensifying.

Weekly Summary

The week ended with major indices showing little change but with increased sensitivity to rates and record diesel prices as one of the sources of inflationary risk.

The crypto market concluded the week with a return of institutional demand: net inflow into exchange-traded products amounted to $1.238 billion after a reversal in flows during the week.

Key trends include:

  1. The divergence between the dollar and yields remains unresolved: the market anticipates targeted tightening but not the beginning of a new rate hike cycle.
  2. The shortage of refining capacities and low distillate stocks are creating an inflationary channel with a lag that is not fully dependent on oil prices.
  3. Outflows from U.S. equities continue amid index resilience: the direction of capital movement diverges from price dynamics.
  4. The crypto market remains in a Bitcoin-dominant phase. The altseason index stands at 40 out of 100, with noticeable rotation into altcoins yet to begin.

Triggers for the upcoming week include:

  • The Federal Reserve meeting on September 15-16, with a current rate hike probability of 63%;
  • The release of CPI data prior to the meeting, which will determine the final trajectory of expectations;
  • Continued verbal interventions ahead of the rate decision;
  • Trends in distillate stocks and refinery utilization as signals of sustained or diminished inflation risk from fuel.

The market closes the week in a coiled spring state: indices are at highs, rates at multi-year peaks, and the dollar does not confirm the movement. The next week will reveal which of these forces will change direction first.