Falling Yields and Oil Lift Stocks Despite a Hawkish Fed

Stocks are rebounding sharply, with S&P 500 Index (SPX) futures up 1.28% and moving above yesterday’s highs as Treasury yields, oil, and the U.S. dollar pull back after the Federal Reserve’s hawkish rate decision. The bigger fight now is between tighter monetary policy and improving financial conditions, because lower long-term yields and cheaper energy are giving stocks breathing room even as another rate increase remains on the table.

In One Minute

The Federal Reserve raised rates by 25 basis points; every voting member supported the move, and 16 of 18 members supported another increase during the final meetings of the year. That initially hit stocks hard, but the market has reversed; the 10 year Treasury yield is now below 4.95%, crude oil is back below $100, and the U.S. Dollar Index (DXY) is weakening.

For me, the key relationship is straightforward: if yields and oil continue lower, stocks have room to rally. The main risk is that higher rates and energy costs eventually weaken consumers and the economy. On the technical side, I want the S&P 500 to stay above its recovered bullish trend line, while Bitcoin (BTC) needs to hold $75,500 and eventually break $82,850.

The Setup

The Federal Reserve delivered the expected 25 basis point increase, but the message was more hawkish than expected. All voting members backed the move, while 16 of 18 members supported another increase before year-end. The Fed funds watch tool is pointing toward another increase, with one more hike the most likely outcome, although two remain possible. Another increase is also slated for January or February.

The initial reaction was a sharp selloff, but that move has been reversed. S&P 500 futures are now up 1.28% and have pushed above yesterday’s highs.

The 10 year Treasury yield is helping. It reached a double top near the major October 2023 pivot after piercing 5%, and that area is producing the rejection I wanted to see. The yield is now below 4.95%.

If long-term yields continue falling, that supports equities and housing. The same applies to oil. Lower yields plus lower energy prices ease pressure on the broader market.

The question is how long that can continue. Higher oil prices and higher interest rates can only squeeze consumers and businesses for so long, and eventually that pressure could become the straw that breaks the camel’s back. Capital spending from artificial intelligence companies is also helping support economic resilience.

What Changed

The S&P 500 briefly broke below its bullish trend line and entered the neutral zone after the Federal Reserve decision. That looked more serious yesterday, but the market has already recovered above that level.

If the S&P 500 closes back above the line, I continue to view the breakdown as a liquidity move that flushed weaker positions before reversing higher. If it closes back below the line, I would treat that more seriously and move toward a neutral stance.

The U.S. Dollar Index also turned lower after retesting a major technical area. The dollar had an ascending trend line connecting several pivot lows, then broke below it, bounced, broke again, formed a double bottom, and rallied back toward the original breakdown area. That retest was rejected, and the dollar is now moving lower.

Crude Oil Futures (CL) are back below $100 per barrel. Oil had gapped above an ascending trend line at the start of the Iranian War, then eventually collapsed back below it. I still see the first major support around $92 to $93, which leaves almost another 10% of downside from the area discussed.

That does not mean oil has to get there immediately or move straight down. The technical structure simply continues to favor more downside.

The fundamental story is also shifting. Saudi Arabia expects one of its main pipelines that was hit by the Houthis to be repaired and operational within days, which could bring additional oil flow back into the market.

Gold Futures (GC) and Silver Futures (SI) are both trying to recover after the Federal Reserve's reaction. Gold is back above the important area around $4,300. A close above that level opens the door to more upside in the near term.

Silver is attempting the same type of recovery. Both metals had been above the neckline before the Fed reaction pushed them sharply lower. Now they are trying to reclaim that neckline and negate the bearish pattern.

Natural Gas Futures (NG) remain unusually quiet compared with the rest of the commodity complex. Seasonality is approaching, data centers need more energy, oil has been volatile, and gold and silver have been moving aggressively, yet natural gas continues to sit near the same area.

I remain interested as long as natural gas holds its key level. The breakout number is $3. That level has repeatedly acted as support and resistance. A clean move above $3 would remove an important technical barrier and could open substantially more upside.

Among individual stocks, Lennar Corporation (LEN) initially sold off after earnings and reached an important trend line before recovering. The larger support zone runs from around $74 down to about $71, where a descending trend line and major horizontal support come together.

The first trend line was pierced around $74 75, and Lennar traded as low as $73 and change. If it comes back into that area, I still like the setup. Falling long-term yields would also help housing if rates on the 10-year, 20-year, and 30-year continue moving lower.

Intel Corporation (INTC) is pushing higher toward $106 85. If Intel breaks that level, I see room toward the gap fill at $122.

Dell Technologies Inc. (DELL) has an ascending trend line around $607. If the stock reaches that area, I would watch it as a possible swing short.

Lumentum Holdings Inc. (LITE) is also pushing sharply higher. It is trading around $953, with major resistance just above $1,000 at a descending trend line.

Bank of America Corporation (BAC) has a bounce area between $56 90 and $56. Several previous pivot points sit there, so that remains the important support zone if the stock pulls back.

Generac Holdings Inc. (GNRC) is up roughly 30% after announcing a deal with Amazon.com, Inc. (AMZN). The chart gives me an intraday resistance zone between $241 and $243 based on several pivot points and a trend line.

That Generac setup is specifically a day trade idea, not a swing short. Timeframe matters. A level that works for a quick intraday trade does not automatically make sense for a position held for days or weeks.

NIKE, Inc. (NKE) is a different type of setup. The stock is near multidecade lows and pays a dividend. The company has made mistakes, but the brand remains strong, and the stock is being priced as if a turnaround may never happen. That makes it interesting from a contrarian, longer-term perspective.

Digital Assets and Crypto

Bitcoin continues to hold its important technical support area.

Price pierced that support after the failure to move the Clarity Act forward, but the daily closes remained above it. Bitcoin also held up relatively well when gold and silver sold off after the Federal Reserve decision, and it is moving higher again.

The larger bullish pattern is still intact. Bitcoin made the move higher that created the flagpole, followed by consolidation that continues to resemble a bullish flag.

The invalidation level is $75,500. If Bitcoin closes below $75,500, I would consider the bullish pattern a failure, and that opens the door toward $67,000.

The larger issue is still the sequence of lower highs. If I want stronger evidence that the Bitcoin bear market has bottomed, Bitcoin needs to take out the previous major high around $82,850.

A break above $82,850 would create a higher high and add much stronger technical confirmation that the larger structure is changing.

So Bitcoin looks constructive, but it still has work to do. Hold $75,500 first, then break $82,850.

Why It Matters

The market is getting relief from the exact areas that were creating pressure.

The 10 year yield is falling below 4.95%. Oil is back below $100. The dollar is weakening. Those three moves are supportive for equities.

Lower long-term rates also help housing, which matters for Lennar and the broader consumer. Lower oil reduces another source of inflation and household pressure.

Gold and silver benefit from the weaker dollar and softer yields if they can reclaim their technical levels. Bitcoin is also showing relative strength, but the bullish case still needs confirmation through $82,850.

The risk is that monetary policy remains tight enough for long enough to eventually hit economic activity. Another rate increase is still expected before year-end, and potentially another in January or February.

Key Levels

The levels I care about most are the S&P 500 trend line, the 10-year yield below 4.95%, oil moving toward $92 to $93, gold holding around $4,300, and Bitcoin protecting $75,500 while trying to break $82,850.

Bull Case

The bullish equity case stays intact if the S&P 500 remains above its recovered trend line and the 10-year yield continues moving lower.

Oil continuing toward $92 to $93 would ease additional pressure on the market. Gold closing above $4,300 would support more near-term upside, while silver reclaiming its neckline would negate the bearish pattern.

Natural gas becomes much more interesting above $3.

Intel strengthens above $106 85 and then has room toward the $122 gap fill. Lennar remains attractive around the $74 to $71 support zone, particularly if long-term rates continue falling.

Bitcoin strengthens considerably if it continues holding $75,500 and breaks $82,850, because that would finally create a higher high.

Bear Case

The first warning would be the S&P 500 closing back below its bullish trend line and returning to the neutral zone. That would make the earlier breakdown look more meaningful.

The broader macro risk is that higher rates and energy costs eventually overwhelm consumer resilience. Another rate increase is still expected, and the cumulative pressure remains important.

Bitcoin has the clearest invalidation level. A close below $75,500 breaks the current bullish pattern and opens the door toward $67,000.

Gold also needs to hold the recovery around $4,300. Silver needs to reclaim its neckline rather than fail beneath it.

What to Watch Next

I’m watching whether the S&P 500 can close above its recovered bullish trend line and confirm that yesterday’s breakdown was simply a liquidity move.

I’m also watching whether the 10 year Treasury yield continues below 4.95%, whether crude oil keeps moving toward $92 to $93, and whether gold can close above $4,300.

Natural gas needs $3. Intel needs $106 85. Dell becomes interesting around $607. Lumentum has resistance just above $1,000. Lennar has support from $74 down to $71. Bank of America has support between $56 90 and $56. Generac has intraday resistance from $241 to $243.

And in crypto, Bitcoin needs to keep $75,500 intact and eventually take out $82,850.

Bottom Line

Right now, the market is getting support from falling Treasury yields, weaker oil, and a softer dollar even though the Federal Reserve remains hawkish. As long as those relationships continue and the S&P 500 holds its recovered trend line, the bullish structure remains intact, but Bitcoin, gold, oil, and individual stocks all have specific levels that still need confirmation.

This is a market where I want the levels to come to me, because patience and price discipline matter more than chasing the move.