Good morning! After a week of bond yields that ratcheted up, a Fed meeting will test its ability to make markets believe it has the juice — and the guts — to do something about it.

What we're watching on Tuesday: A light day on the economic calendar should leave investors gaming out the week ahead and watching to see if the Iran situation might offer any relief for energy prices.

And critically, as always with a light day on the calendar, the market will watch itself — which can produce some interesting results.

Here's Jake Conley with a preview of the week ahead.

Yahoo Finance Morning Brief is written by Ethan Wolff-Mann and Hamza Shaban.

People walk outside the New York Stock Exchange on Sept. 9, 2026, in New York City. (Spencer Platt/Getty Images)

If last week was the setup (consumer and wholesale inflation data, surging oil prices), then this week is the main event, with all eyes squarely on Washington, D.C., where the Federal Reserve on Wednesday will announce its latest rate decision.

With a relatively quiet calendar otherwise, the hike vs. hold debate — and its impact on markets — will define the week.

The rising yields and oil prices weighed on the stock market, which welcomed the higher-than-expected inflation report on Friday that signaled a coming Fed hike.

For the week, the S&P 500 (^GSPC) rose 0.8%, and the Dow (^DJI) and Nasdaq (^IXIC) rose 0.9%.

Wednesday will set the tone for the entire week, with the Fed's decision due out at 2 p.m. ET, followed by a press conference from Chairman Kevin Warsh at 2:30 p.m. ET. Last time, Warsh's comments sent Treasury yields spiking as markets read an abdication of responsibility, so much attention will be paid to how the Fed chair addresses inflation.

A hike would certainly put some of those concerns to rest.

Elsewhere on the economic calendar is a collection of manufacturing data, set to give investors another view into how the AI infrastructure boom is reshaping an increasingly physical economy. We'll get Empire manufacturing numbers on Tuesday, followed by the Federal Reserve's industrial production and manufacturing production data on Friday.

Fed Chairman Kevin Warsh. (Li Yuanqing/Xinhua via Getty Images)

Federal Reserve Chairman Kevin Warsh has been very clear about one thing in the first three months of his tenure: He does not want the Fed telegraphing its next move. But investors are pretty firmly convinced they know what's coming anyway.

After consumer pricing (CPI) data came in largely in line with estimates on Friday — with so-called "core" CPI slightly hotter than expected on a monthly basis — bets that the Fed will issue a rate hike on Wednesday have spiked to roughly 86%.

The argument is straightforward, according to JPMorgan's chief US economist Michael Feroli: "Simply that core PCE inflation has been above 3% every month this year and has made little recent progress heading towards 2%."

Pushing up bets that the Fed will hike is Warsh himself, who took a much more forceful approach in his first Jackson Hole symposium on the Fed's role in taming inflation than he had previously. Those comments, perhaps intentionally, went toward assuaging market watchers who were concerned after the July meeting about how the new Fed chair views the central bank's role in taming inflation.

"Price stability is not self-executing, nor is inflation necessarily mean-reverting," Warsh said in his remarks at Jackson Hole, Wyo. "It is the Fed's job to deliver stable prices."

At the Fed's last rate-setting meeting in July, the decision to hold rates steady saw dissents from Minneapolis Fed president Neel Kashkari, Cleveland Fed president Beth Hammack, and Dallas Fed president Lorie Logan. If the Fed delivers a hike on Wednesday, Feroli wrote, it's likely to be a unanimous call.

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Treasury Secretary Scott Bessent, who's trying to rein in yields, speaks at the Republican National Convention. (Kevin Dietsch/Getty Images)

The war in Iran is heating back up, 10-year Treasury yields are approaching 5%, and the Fed looks poised to raise rates, a move typically taken to be restrictive for the commercial sector.

Yet equities are just off all-time highs across the major indexes, and strategists across Wall Street have set rosy targets for the S&P 500, sitting near 7,670 on Friday afternoon.

That has split the outcomes for Wall Street, depending on your timeline, RBC Capital Markets head of US equity strategy Lori Calvasina said. In the near term, Calvasina wrote to clients on Friday, the risks of a "garden variety pullback" have grown — oil at $100 per barrel, US-Canada trade schadenfreude, etc.

But over the longer term, Calvasina said, RBC "remain[s] constructive," with potential upside risk to their 12-month S&P 500 target of 8,150 — a premium of roughly 6% over where the index sits now — "if interest rate fears recede."

In some ways, an interest rate hike might not make that much of a difference, LPL Financial chief equity strategist Jeff Buchbinder argued in a note to clients on Friday. Despite all of the potential headwinds facing the market, equities remain close to all-time highs, largely spurred forward by the massive investment cycle driven by AI.

If the Fed hikes rates, the argument goes, the AI economic machine might shrug it off.

See what else is trending on Yahoo Finance.

Merchant ships belonging to Iran and other countries remain at anchor in the Strait of Hormuz in Bandar Abbas, Iran, on Sept. 10, 2026. (Fatemeh Bahrami/Anadolu via Getty Images)

Another thorn in the side of the Federal Reserve's dovish members has reemerged: oil prices above $100 per barrel.

Brent oil prices crossed $100 for the first time in roughly two months on Wednesday as a resurgence in the US-Iran conflict and worries over disruptions throughout the global oil complex pushed prices past the triple-digit mark.

The conflict in the Middle East, now in its seventh month, has continued to snarl the flow of energy products out of the Persian Gulf as Washington and Tehran remain at war, with shipping through the Strait of Hormuz still constrained by the threat of violence.

At the same time, the global energy market is facing pressures on multiple fronts outside Iran. To the west, attacks in recent days by the Houthi militant group on Saudi Arabian energy infrastructure have caused a shutdown of a key Hormuz alternative to the Red Sea that moves several million barrels per day.

To the north, strikes by the Ukrainian military inside Russia have effectively targeted Moscow's refining sector, shuttering capacity in a crucial market that, prior to 2022, was responsible for roughly 10% of the world's diesel exports.

"Oil investors are expressing their view about the impact of the latest bout of escalation in the Middle East in an unambiguous way," said Tamas Varga, an analyst at PVM Oil Associates. "They are voting with their dollar, and this vote strongly indicates that unless the Strait of Hormuz re-opens, and oil starts flowing again uninterruptedly, supply will not be aligned with demand in the foreseeable future."