Fed Rate Hike Looms, Threatening US Stock Market Rally

Investors are bracing for a possible rate hike at next week's Federal Reserve meeting, which could threaten the U.S. stock market rally. The central bank has historically used interest rate increases to combat inflation, and with prices persistently above its 2% annual target, many expect a rate hike.

Following last month's speech by new Fed Chair Kevin Warsh, bets have grown that the Fed will raise rates on Wednesday at the end of its two-day meeting. This week's data showed consumer inflation picked up in August, with the core measure of the Consumer Price Index rising by 0.3%, a hotter-than-expected number.

BNY Wealth's Alicia Levine said, 'The weight is now on a hike in September.' A rate hike could have several negative effects on stocks, including raising borrowing costs for consumers and companies, creating more investment competition from bonds, and pressuring equity valuations.