Fed Cliffhanger Looms Over Wall Street Rate Hike Decision

Wall Street is bracing for a Federal Reserve rate hike decision on Wednesday, with traders betting on a quarter-point increase to 3.5%-3.75%. This comes as the 10-year Treasury yield flirts with 5% and US stocks cool off their highs.

The uncertainty has grown since new Fed Chair Kevin Warsh struck a more inflation-focused tone, and data showed strong job gains plus core PCE inflation at 3.3% year-on-year, still well above the Fed's 2% target.

Higher rates can push Treasury yields up, squeezing valuations for companies with expected cash flows further in the future, and making debt more expensive by lifting interest expense and making refinancing harder.

The S&P 500 is up about 11% in 2026 but remains roughly 2.7% below its mid-August peak, while the 10-year yield reached 4.96% on Thursday.