Here is Schwab's early look at the markets for Wednesday, September 16.

The Federal Reserve announces its rate decision at 2 p.m. ET today with investors braced for the first hike since mid-2023. Trading could be slow this morning, with chances of a hike at 94% late Tuesday, according to the CME FedWatch Tool.

"When we think about the main drivers of inflation—tariffs, energy, and AI capex—none have slowed materially," said Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research (SCFR). "All of that adds up to strong headwinds for inflation returning to 2%, and thus a Fed that is increasingly looking like it has to hike."

Inflation has been above the Fed's 2% target for more than five years and the August monthly core Consumer Price Index (CPI) excluding food and energy topped expectations at 0.3%.

Major pressure points are converging. The 10-year Treasury yield hit a 19-year high Tuesday, oil is above $100 with the Strait of Hormuz effectively closed, S&P 500 breadth is weakening, and both equity and bond volatility are rising from lower bases— a combination that raises the odds of an outsized market move around the Fed decision.

The Fed is somewhat backed into a corner because today might be the last chance to hike at a regularly scheduled meeting until December. Next month's meeting occurs just days before November's mid-term elections, making a hike then politically difficult.

Also, Fed Chairman Kevin Warsh appeared to telegraph a hike late last month in his Jackson Hole speech when he made clear the Fed would be tough on inflation.

Back in July, the vote was 9-3 in favor of a pause. Three policymakers wanted rates hiked then, possibly recalling the 2021-2022 era when the Fed delayed rate hikes and then wrestled with 40-year high inflation after Russia attacked Ukraine and amid post-pandemic supply chain tangles.

A split vote today could challenge the Fed’s credibility, but it's possible considering dovish words recently from Fed Gov. Christopher Waller. It's unclear if CPI was worrisome enough for him to change his mind. Some analysts think a hike may be unwarranted, noting recent slower gains in annual core CPI and weak housing.

Besides rates, numbers to watch from the Fed include inflation expectations and gross domestic product estimates. In June, the Fed sharply raised its estimates to 3.6% and 3.3%, respectively, for headline and core Personal Consumption Expenditures (PCE) price growth this year. The previous ones were both 2.7%.

Focus could turn to the Fed's 2027 PCE projections, which were 2.3% for headline and 2.5% for core in the June report. Any rise would likely have futures traders consider a "higher for longer" rate picture that might unsettle the market.

Oil remains a key inflation risk. Energy propped headline inflation just as the Fed debated whether to tighten. A move toward $5 a gallon gasoline would be a major consumer and policy headwind.

As oil climbed this week, the 10-year Treasury note yield hit 5.04% early Tuesday, a level last seen in 2007. Rising yields make it more costly for consumers and businesses to borrow money. However, they can indicate economic strength, and perhaps there's a combination considering the AI buildout. However, AI suffered a blow early this week from concerns about safety and industry announcements that a slowdown may be necessary.

August retail sales at 8:30 a.m. ET today represent the week's key economic report. Analysts expect a 0.8% jump from July, but that's off weakness that month when retail sales declined 0.6%.

Since the report isn't adjusted for inflation, headline numbers often reflect the rise and climb of gas prices. The important number is control group retail sales, used in the government's gross domestic product (GDP) calculation and excluding gas station sales and several other metrics. It fell 0.4% in July, and analysts expect a 0.4% August rebound.

In data yesterday, the September Empire State Manufacturing index hit 7.6, below Briefing.com consensus of 14.1 and the prior 20.6. A 20-year Treasury auction yesterday met "dismal" demand, according to Briefing.com, including record low foreign demand.

Today brings August monthly import and export price data just before the open. Both fell monthly in July.

The U.S. government also releases its weekly crude inventory report this morning. Stockpiles typically inch up this time of year, but strategic U.S. reserves are the lowest since 1982, providing far less cushion and partly explaining the continued rise in crude prices.

Another report today is the monthly Treasury International Capital release, showing how much foreign investors and governments invested in or sold U.S. assets. This data can give investors a sense of how much faith overseas participants have in the U.S. economy.

Tuesday saw major indexes slide for the sixth session in the last seven, pinned down by five-month high oil prices and lofty yields. Energy Secretary Chris Wright told CNBC the damage to an important Saudi pipeline could be repaired in days, but some industry experts said it could take far longer, the network reported. Oil rose 4.6% to above $106 per barrel.

Only two of 11 S&P 500 sectors climbed Tuesday, continuing a string of sessions marked by lackluster sector action. Energy remained the leader, with materials getting a slight boost. Discretionary had the worst day, with retailers, restaurants, home appliance makers, and auto makers all hurt by rising yields.

Technically, key support of 7,600 near the 50-day moving average for the S&P 500 Index was broken Tuesday after holding the last week. There's secondary support in the 7,490-7,500 range.

S&P 500 breadth sank, as 34% of shares trade above their 50-day moving averages. That's near five-month lows, suggesting fewer stocks supporting the index and weakness across many sectors.

The S&P 500 now trades below its 50-day moving average of 7,611. The tech-heavy Nasdaq 100 also fell under its 50-day this week and hasn't posted a new high since early June.

Checking individual movers Tuesday, some AI infrastructure and chip stocks posted light gains a day after their sharp decline. A handful of AI-related names like Arm Holdings, Marvell Technology, AMSL, Lumentum, and Nvidia rose. This came after President Trump publicly pushed back against AI fears that hurt shares on Monday. His opposition to an AI slowdown might curb legislative efforts to accomplish that.

Circle Internet Group, Coinbase, and Strategy all fell sharply and bitcoin descended 3.7% after the failure of a Senate procedural vote on the Clarity Act, which would establish a new regulatory framework for cryptocurrencies and other digital assets.

Skyworks Solutions jumped 13.5% as the CEO of the Apple supplier said he was confident a pending merger with Qorvo would close soon, Barron's reported.

Axon Enterprise fell almost 10% after announcing plans to raise $1 billion in debt, Barron's said.

Dave and Buster's Entertainment plunged 19% after reporting a quarterly loss amid declining entertainment sales.

Apple fell after a GF Securities analyst reported "lukewarm demand" for iPhone 18 Pro models three days after pre-orders began.

Qualcomm rose 4% as StoneX reiterated its buy rating a week after Qualcomm announced an AI chip deal with Amazon.

Enova International crumbed 23% after announcing it withdrew its application related to the proposed $369 million acquisition of Grasshopper Bancorp.

The Dow Jones Industrial Average® ($DJI) plummeted 328.09 points (-0.63%) Tuesday to 52,093.11; the S&P 500 Index ($SPX) lost 34.25 points (-0.45%) to 7,585.73, the lowest close since July 31, and the Nasdaq Composite® ($COMP) stumbled 204.84 points (-0.78%) to 25,981.57.