Fed Signals No Rate Cuts in 2026 Amid Sticky Inflation

Federal Reserve Chair Jerome Powell's recent testimony before Congress extinguished expectations for interest-rate cuts in 2026, as he emphasized persistent inflation hovering above the 3% target. Citing sticky price pressures in housing and services, Powell indicated that monetary policy would remain restrictive until clearer progress toward the Fed's 2% goal emerges. This stance aligns with the central bank's updated projections, which now foresee steady rates through year-end amid resilient economic data.

Bond yields reacted sharply, with the 10-year Treasury note climbing above 4.2%, a level that amplified pressure on growth-oriented equities. The S&P 500 ETF (SPY) dipped 1.2% in immediate trading, while the iShares 20+ Year Treasury Bond ETF (TLT) fell over 2%, reflecting repricing for a "higher for longer" regime. Markets have adjusted swap pricing to imply less than 25 basis points of easing by mid-2026, upending prior bets on aggressive cuts.

The shift underscores risks to equity valuations, particularly for high-duration tech and consumer stocks sensitive to borrowing costs. Investors are pivoting toward earnings resilience, with third-quarter reports from megacaps now critical to sustaining multiples. Traders should monitor upcoming CPI data on November 13 and Powell's next policy remarks for any softening in rhetoric, alongside corporate guidance on margin pressures from elevated rates. On X, sentiment has turned bearish, with #NoCuts gaining traction as users highlight the drag on asset prices.