The Fed Just Raised Rates. What Comes Next?

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This morning’s piece walked through what a Fed rate hike could mean for stocks. As of this afternoon, we’re not talking hypotheticals anymore. They actually did it.

The Fed raised its target range a quarter point today, to 3.75% and 4.00%, the first hike since 2023. The vote was unanimous, 12 to 0, nobody wanted to be the lone dissent on this one.

Table of Contents

Why they did it

The Fed’s own statement reads almost upbeat about the economy, calling growth “solid,” consumer spending “resilient,” and productivity “strong.” Then it gets to the actual reason for the hike: inflation “remains elevated,” and today’s move is supposed to get things back to the 2% target sooner rather than later.

Fed Chair Kevin Warsh wasn’t shy about it in the press conference either. “Inflation remains elevated, and has been for too long,” he said, adding that “this summer’s inflation readings do not tell me that underlying trends have meaningfully improved.” That’s about as close as a sitting Fed chair gets to saying the quiet part out loud.

The dot plot says they’re not done

Here’s the part that matters more than today’s move. Back in June, the Fed’s own projections had this exact hike penciled in as the finish line for 2026. Today’s updated projections push past it, pointing to one more quarter point hike before year end, plus another one in 2027, before the committee expects rates to start coming down.

What was supposed to be a landing spot in June just became a layover.

How stocks actually reacted

If you were hoping for a clean, obvious market reaction, today wasn’t it. The S&P 500 dropped, clawed some back, gave it up again, and by mid-afternoon SPY was sitting about 0.78% lower. The Nasdaq, tracked here through QQQ, was down a smaller 0.47%.

Oddly, the 10-year Treasury yield actually fell about 4 basis points on the day, which isn’t the textbook reaction to a hike. It suggests the market was less rattled by today’s quarter point than by whatever the Fed signals next.

The chip stocks weren’t moving together, and that’s the real story

This is the part that’s going to get flattened into “AI stocks rallied” by tomorrow, and that’s not actually what happened. It was a lot more specific than that.

Intel jumped after Reuters reported it’s in talks with SK Hynix about building memory chips in the US, possibly leasing space at Intel’s Ohio plant or forming a joint venture that could include cloud hyperscalers. SK Hynix immediately said no deal is finalized and nothing’s been decided, which is corporate speak for “don’t get ahead of us.” The market got ahead of them anyway.

AMD rode along with the enthusiasm without needing a headline of its own.

Nvidia, the name most people actually mean when they say “AI stocks,” barely moved.

Micron and Broadcom went the other direction entirely, both red on the day. Same sector, same news cycle, completely different stocks.

Two more things worth knowing

Crypto took a real hit yesterday too, but it wasn’t the Fed’s doing. A Senate vote on the Clarity Act, the crypto regulation bill, failed, and Bitcoin and crypto-linked stocks dropped hard on it.

And energy is still working through the pipeline story from earlier this week. If you missed it, today’s piece on the oil spike covers why crude is still whipping around and which stocks are exposed.

Bottom line

The headline number was exactly what markets expected. What wasn’t fully priced in is that the Fed thinks it isn’t done, and that’s the part likely to keep showing up in how individual stocks trade over the next few months, not as one uniform move, but exactly like today, some up, some down, each for their own specific reasons.

Want to know before the next headline hits: Predictive Alpha runs your stocks through TradeSmith’s AI forecasting engine, so you see which names are actually exposed to a move like today’s, not just which ones share a sector with the headline. Today proved the sector doesn’t tell you the story anymore. See how Predictive Alpha forecasts react to days like this.

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