Asian equities rose 0.4%, ending a four-day losing streak, and US index futures were up about 0.2% ahead of Wednesday's Fed decision, while European markets prepared to open higher. The market now prices more than a 90% probability of a rate increase—the first since 2023—and that confidence helps explain the measured, rather than dramatic, move higher in risk assets: investors are largely waiting for confirmation of a priced-in scenario rather than positioning for a surprise.

Treasury yields rose to 5.04% intraday, a peak not seen since 2007 and above yesterday's high of 5.02%, but eased to about 4.99% during the Asian session. The recent rally in energy prices together with rising Fed rate expectations sparked the sell-off in bonds over the past days; the modest pullback in yields now appears to reflect short-term overbought conditions rather than a reversal in Fed expectations.

Some relief came from oil: Brent eased about 0.5% to $108.20 after an industry report showed US inventories had risen and the recent supply-driven rally began to look overstretched.

Gold, meanwhile, recovered to roughly $4,330 an ounce, recouping part of the loss from two down sessions. The metal's bounce amid a pause in rising yields fits the view that gold can find support under a range of Fed outcomes—whether a hike that boosts recession risk or a pause that revives questions about central bank credibility.

Bitcoin remained under pressure after the US Senate blocked a landmark crypto market structure bill. The decision benefits proponents of stricter regulation and hurts the crypto market by removing a potential catalyst for institutional inflows.

As I noted above, the Fed remains the primary focus. Hotter-than-expected core inflation last week, together with rising concern about the budget deficit, has reinforced expectations that Chair Kevin Warsh and his colleagues may tighten policy. In my view the market underestimates the risk of a rate increase without clear guidance on the path ahead: such an outcome would compel investors to demand a higher term premium on long-dated bonds as protection against inflation, even as short rates follow the Fed's trajectory.

A technical picture for the S&P 500 shows that buyers' immediate task today is to clear resistance at $7,607. That would show strength and open the way to $7,633. Holding $7,656 would further cement the bulls' position. On the downside, if risk appetite ebbs, buyers must defend $7,574. A break there would quickly push the index back to $7,563 and open the road to $7,546.