Stocks May Rise Despite Rate Hike

The stock market is bracing for a possible rate hike from the Federal Reserve this week, but traders are predicting an unusual outcome - stocks may rise despite higher rates.

The FedWatch Tool on the CME shows that there's a 90% likelihood of a rate increase to between 3.75% and 4.00%, with expectations for two more hikes in October and December also spiking.

This scenario is unusual because stocks typically fall when rates rise, as it increases borrowing costs and lowers the value of future earnings.

However, investors are hoping that a rate hike or two will help tame pricing pressures and keep long-term bond yields anchored. The 10-year Treasury yield hit 5% for the first time since 2023 on Monday, hurting equities.