On Wednesday, the Fed hiked for the first time in three years.

Today, both stocks and bonds rallied at the same time.

That combination is worth sitting with. A hike is supposed to be the thing markets brace against, not the thing they rally into the day after.

Oil is doing the explaining.

Brent settled below 105 dollars, down from above 109 earlier in the week.

The 10 year yield retreated from its highest level since 2007, snapping an eight session run of increases.

Semiconductors, the sector that fell 5.9 percent on Monday's AI safety debate and Fed positioning, outperformed today, with the key industry index climbing 3.1 percent.

Nothing about Wednesday's hike changed.

Rates still moved to 3.75 to 4 percent. Warsh still held a firm line on price growth above 3 percent over six and twelve months. Projections still point to one more increase this year.

What changed was the variable sitting underneath all of it. Oil eased, and that alone did more for risk appetite than a full policy decision the day before.

That's the thesis.

For weeks, this market's direction has tracked oil more closely than it's tracked the Fed itself.

The tightening cycle restarted Wednesday. The rally today came from the one input the Fed doesn't control.

One more decision remains this week, with the BOJ expected to raise rates Friday, its most closely spaced increases since 1990.

"How far does the Fed's tightening cycle go?"

"How much of that path gets written by the Fed, and how much gets written by wherever oil settles next?"

A rate decision holds for months. An oil price can hold for a session.

This week, the second one has been setting the tone for the first.

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