Morning Briefing: Falling Oil Eases Yield Pressure as Stocks Rally Despite Hotter Inflation

S&P 500 futures are up about 1% this morning as crude oil pulls back and Treasury yields ease, even after core inflation came in slightly hotter than expected. The bigger market relationship remains oil, inflation, yields, and whether the Federal Reserve can raise rates next week without disrupting stocks' bullish structure.

In One Minute

Core CPI rose 0.3% month over month versus 0.2% expected, pushing the probability of a Federal Reserve rate hike next week to 86.7%. Stocks are still rallying because West Texas Intermediate Crude Oil has reversed from $104, the U.S. 10 Year Treasury Yield is easing toward 4.92%, and the S&P 500 Index continues to hold its bullish trend structure. The key macro level is $92.50 support in crude, while Bitcoin needs to continue holding roughly $76,000 to keep its possible bull flag intact.

The Setup

Consumer Price Index inflation came in at 3.4% year over year, with core CPI at 2.4%. Month-over-month CPI was 0.4%, while core CPI came in at 0.3% versus 0.2% expected. The market is now pricing in an 86.7% probability of a rate hike next week, up from roughly 70% after the previous inflation data.

The S&P 500 Index (SPX) is still above its bullish trend line. Price tested that support, held it, and is now bouncing about 1%. The descending channel can still develop into a bull flag as long as that trend line remains intact.

What Changed

West Texas Intermediate Crude Oil (WTI) reached $104 per barrel after the close and then reversed sharply. Crude fell about 5%, traded below $99, and later moved fractionally back above $99. The next major support is $92.50. Oil has still gained about 40% from its low roughly one month ago and about 30% over the last two weeks.

The U.S. 10 Year Treasury Yield (US10Y) is pulling back toward 4.92%, while the U.S. Dollar Index (DXY) is also easing slightly. That combination is helping stocks, gold, and silver stabilize.

Gold Spot U.S. Dollar (XAUUSD) is holding the key support area beneath its head and shoulders pattern. Silver Spot U.S. Dollar (XAGUSD) is also holding its neckline. A silver breakdown would target about $55, while continued support could send price back toward $70 to $71. Natural Gas Futures (NG) remain neutral until price either reclaims the upper pivot or breaks the lower trend line.

Oracle Corporation (ORCL) is recovering after earnings. $179 is the main upside level, while $139 to $140 is short-term support. Adobe Inc. (ADBE) has a potential swing setup near $220 if price retraces to its former breakout trend line. KraneShares CSI China Internet ETF (KWEB) has already completed that breakout and retest structure, with support around $24.50. RH (RH) has support around $118 to $119 and an upside gap near $170.

Digital Assets and Crypto

Bitcoin U.S. Dollar (BTCUSD) is catching a bid from a clearly defined support zone around $76,000. Price has tested this area multiple times, and as long as Bitcoin holds this general vicinity and the rising trend line, the structure can still develop into a bull flag.

The bullish setup has not been confirmed by a breakout yet. The important condition is support. Holding roughly $76,000 keeps the structure constructive and leaves the door open for an eventual move higher. A break below that area would weaken the setup and become problematic for the bullish case.

Why It Matters

Oil remains the main connection between inflation, yields, and stocks. Diesel fuel is above $6 per gallon at all-time highs, so continued weakness in crude would help ease some of the inflation pressure that has pushed Treasury yields higher.

The expected rate hike itself is becoming less important than what Federal Reserve Chair Kevin Warsh says afterward. If the message is that more hikes could follow, that is where the market reaction could become more meaningful.

Key Levels

The two levels I am watching most closely are $92.50 in crude and roughly $76,000 in Bitcoin. Oil controls much of the macro pressure, while Bitcoin's support determines whether its bullish structure survives.

Bull Case

Stocks remain constructive while the S&P 500 holds its bullish trend line and falling oil keeps pressure off Treasury yields. Gold and silver improve if their support structures continue holding. Bitcoin stays constructive above roughly $76,000, while Adobe near $220 and KWEB near $24.50 remain important swing support areas.

Bear Case

A renewed surge in oil would bring inflation and Treasury yields back into focus. Silver becomes vulnerable toward $55 if its trend line breaks, Bitcoin loses its bullish structure if the $76,000 area fails, and natural gas turns bearish if it breaks below its lower trend line.

What to Watch Next

The Federal Reserve decision next Wednesday at 2:00 PM is the major catalyst. With the probability of a hike already at 86.7%, the bigger question is what Kevin Warsh says afterward and whether additional rate hikes remain on the table.

Bottom Line

The market is absorbing slightly hotter core inflation because falling oil is easing Treasury yield pressure. As long as crude continues cooling, the S&P 500 holds its bullish structure, and Bitcoin holds roughly $76,000, the broader setup remains constructive.