US Stocks on Edge Ahead of Possible Rate Hike at Fed Meeting

Investors are bracing themselves for a possible rate hike at next week's Federal Reserve meeting, which could threaten a US stock market rally already showing signs of vulnerability to rising bond yields.

The central bank has historically used interest rate increases to combat inflation, and the latest data shows that consumer prices picked up in August, with the core measure of the Consumer Price Index rising by 0.3 per cent.

Some investors remain dubious that the Fed will take action, but others are predicting a quarter-percentage point hike, with bets increasing after last month's speech by new Fed Chair Kevin Warsh, which was seen as hawkish.

The benchmark S&P 500 is up nearly 12 per cent so far in 2026, lifted by robust corporate earnings growth boosted by massive spending on AI infrastructure, but the index has pulled back recently and is about 2 per cent below its mid-August all-time high.