The Fed hiked rates and the market rallied like it heard good news, which is roughly how diesel got to $6.50 · Daily Briefing

In 30 seconds: The Federal Reserve under new Chair Kevin Warsh delivered a rate hike, but equity markets surged sharply in the days following the decision, with analysts debating whether financial conditions remain restrictive and how Warsh frames the neutral rate. Disruptions to oil flows through the Strait of Hormuz and the Red Sea have driven supertanker charter rates to record highs, with Brent crude volatile around $100 per barrel and refined product prices surging despite lower crude benchmarks. Initial jobless claims fell below 200,000, the unemployment rate has stayed under 5% for 60 consecutive months, and consumer spending indicators remain robust, suggesting the US labor market is holding firm despite elevated interest rates. Bitcoin climbed back to levels not seen since January at $84,000, with Ethereum and crypto-linked equities like MicroStrategy also posting strong gains, outpacing broader market returns.

The S&P 500 surged 2.7% over the three days after the Fed meeting, the largest such rally since the three days after the Fed meeting six weeks before. On the session in question, SPX climbed 1.5% and NDX added 2.5%. The VIX, meanwhile, settled at 14.82, barely moving on the day. If the central bank just tightened policy, somebody forgot to tell volatility. For 50 years, new US Federal Reserve governors have all started with rate hikes. The market, for its part, rallied anyway. The harder question is whether markets can keep rallying when financial conditions are already adding to GDP growth rather than restraining it. The Fed's 1Y FCI-G stood at 0.35 as of August, meaning adding to GDP growth over the coming year (negative = tailwind). Financial conditions are, as one observer noted, hard-pressed to call restrictive. If financial conditions are boosting GDP, it is difficult to see inflation returning to target soon. Short dated calls were arguably cheap, but have gotten a lot more expensive today, while 2-3 month calls have not yet caught the fever. The NDX Nov skew move clearly wasn't priced in. A large 20,000 0DTE call position sat at strike 7475. SpotGamma flagged record SPX/NDX volatility spread and called for a re-sync. The Nasdaq subsequently fell 8% and the S&P dropped 3%, but now that spread is back near its long-term mean. Roughly 24% of S&P weight is trading against the index on oil and rates.

The math of moving oil through a chokepoint someone is actively trying to close is, it turns out, expensive. Broader tanker charter rates have more than tripled since this time last year, triggering what amounts to the biggest ever rally in crude shipping costs. The bottleneck is straightforward. Prewar oil flow through the Strait of Hormuz ran at roughly 21 million barrels per day. Current flow is approximately 11-12 million barrels per day, meaning just more than half the prewar volume is getting through, and at great expense. Oil insurance cost: $10 per barrel. Brent crude, meanwhile, slipped back under $100 per barrel for the first time since before the pipeline attack. This is the strange part. Crude benchmarks are softening while refined product markets continue to move in the opposite direction. So you have a situation where the cost of physically delivering crude has gone parabolic, and the refined products you actually put in your car or truck — diesel at $6.50 a gallon, regular at $4.50 — are priced as though someone is blockading a strait. Which someone more or less is.

The labor market keeps refusing to cooperate with the recession crowd. Initial jobless claims for the week ending 2026-09-12 came in at 196,000, down -10,000 from the prior week's 206,000. That puts claims below the 200,000 threshold. Continuing claims, meanwhile, are running about 10% lower year over year. If you are looking for cracks, you will need a different dataset. The unemployment rate has now held below 5% for 60 consecutive months, the second longest streak in history. The only streak that beats it is the 64-month run that began in the mid-1960s. So the current labor market is historically unusual in the sense that it is historically good, which is the kind of unusual most people would prefer. Consumers, for their part, seem to agree. The retail sales control group is running at 5% over the past three months, and restaurant spending is up 10%. Higher yields and higher oil prices have not, so far, slowed things down. The Russell 2000 closed at 2,875.36 on 2026-09-21, up 0.52% on the day. Within the index, 1122 of its 1949 constituents, or about 57%, are profitable. Last year the nonprofitable names returned 20%, doubling the 10% gain from profitable ones. This year, profitable companies have clawed back roughly 500 basis points of relative outperformance.

Bitcoin touched $84,000 this morning, its highest since January. The move is part of a broader rally: since 6/24/26, BTC is up 41%, a pace that makes most other asset classes look like they're standing still. Gold is up 9% over that same window — respectable, but not competitive with Bitcoin's 41%. Gold closed at $4,381.60 on 2026-09-21, actually slipping 0.98% on the day. Strategy is up over 80% since the end of July, which is more than double Bitcoin's gain over the same stretch. Strategy is down twice as much as Bitcoin over the last year, a fact the recent rally has not yet erased. BTC up 41% since 6/24/26.