Rate Hike Bets Are Back

Wall Street heads into Monday with September hike odds suddenly back above 50%.

Author

Elie Zakhour
August 31, 2026

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The Fed Gets Hawkish Again

Wall Street recalibrated its rate outlook after Fed Chair Kevin Warsh used his first major Jackson Hole speech to deliver a firm inflation warning. Warsh said the Fed must be confident inflation is moving toward its 2% target “clearly and at sufficient speed,” adding that financial conditions are not currently restrictive. Markets responded quickly: the 2-year Treasury yield jumped about 13 basis points to 4.36%, the dollar strengthened, gold declined, and the S&P 500 erased earlier gains as technology stocks weakened. Longer-term yields were comparatively stable, with the 10-year rising about 6 basis points to 4.73% and the 30-year gaining only about 2 basis points to 5.21%, suggesting investors interpreted the speech as reinforcing the Fed’s inflation-fighting credibility rather than worsening concerns about long-term inflation.

The speech significantly increased expectations for tighter monetary policy without explicitly committing to a September move. Markets now see about a 59% probability of a September rate hike, up from roughly 35% before Warsh’s remarks. Corporate news was mixed: an Advent-Stripe consortium reportedly abandoned its pursuit of PayPal, Rivian’s CFO is leaving for GE Vernova, and Eli Lilly’s Mounjaro gained U.S. approval for reducing serious cardiovascular risks, expanding its potential market. Meanwhile, BioNTech and Roche abandoned a personalized cancer-vaccine trial, highlighting the uncertainty surrounding the rapidly developing field.

Peel Take: Warsh just reminded markets that the Fed put has an inflation limit. The interesting part isn't simply that two-year yields jumped, it's that 30-year yields barely moved. Investors appear to be saying that a tougher Fed today could actually reduce the risk of entrenched inflation tomorrow. For stocks, however, that's a tougher setup: if economic growth remains resilient while inflation stays sticky, the Fed may have room to hike without waiting for the economy to weaken. Good economic news could once again become bad news for richly valued growth and AI stocks.

What's Ripe

Elastic N.V. (ESTC) 19.31% 

  • Surged 19.3% after the software company beat fiscal first-quarter expectations and raised its full-year outlook. Adjusted EPS came in at $0.70 versus $0.58 expected, while revenue rose 15% to $478 million.

  • Peel Take: Elastic delivered the combination software investors love: an earnings beat plus a guidance raise. More importantly, its search and data platform sits directly in the path of growing AI workloads, where companies need to retrieve and analyze huge amounts of data. The jump suggests investors are increasingly willing to reward software companies that can show AI translating into actual revenue growth rather than just hype.

Workday Inc. (WDAY) 5.76% 

  • Rose 5.8% after the enterprise software company delivered stronger-than-expected second-quarter results and lifted its profitability outlook. Revenue rose about 13% to $2.65 billion, while subscription revenue climbed 13.9% to $2.47 billion.

  • Peel Take: Workday has two catalysts working at once: improving fundamentals and an M&A premium. The earnings beat and guidance raise give investors a reason to own the business on its own merits, while Silver Lake speculation creates additional upside optionality. The catch is that part of the stock’s valuation may now reflect takeover hopes meaning any sign that a deal isn’t happening could quickly remove that premium.

What's Rotten

PayPal Holdings Inc. (PYPL) 12.71%

  • Plunged 12.7% after reports that Stripe and private-equity firm Advent International abandoned their potential acquisition of the payments company. The news removed takeover speculation that had helped support PayPal shares, although none of the companies publicly confirmed the reported takeover discussions.

  • Peel Take: PayPal just lost its M&A safety net. The sharp selloff shows how much takeover optimism had become embedded in the stock, and with Stripe and Advent reportedly walking away, investors are back to judging PayPal on its own fundamentals and turnaround. It’s also a reminder that buyout rumors can create upside fast, but that premium can disappear even faster.

Marvell Technology Inc. (MRVL) 10.28%

  • MRVL sank 10.3% despite reporting record quarterly revenue and strong guidance, as investors focused on the slower-than-hoped payoff from its closely watched Google custom-AI-chip partnership. Management indicated that more meaningful revenue from the deal is expected beginning in fiscal 2029.

  • Peel Take: Marvell learned the AI trade’s harshest lesson: good numbers aren’t enough when expectations are already sky-high. The business is still growing rapidly, but investors wanted the Google payoff sooner. When a stock has nearly tripled in a year, “eventually” can suddenly sound like a very long time.

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