“Do or do not. There is no try.” Markets are bracing for the Federal Reserve’s interest rate decision tomorrow, and it seems investors want to hear that central bankers will act decisively to bring down inflation. They’re no longer satisfied with a central bank that waits on the sidelines being patient. As Yoda from Star Wars once said, time to get it done.

Ahead of the decision, stocks had a tough day, dragged down by more bad news from the Middle East. Both international and domestic crude oil futures surged, and the dollar ticked higher.

The Nasdaq Composite ended the day down 0.8%. The Dow Jones Industrial Average slid 329 points, or 0.6%. The S&P 500 closed down 0.5%.

In addition to a down day in markets, the 10-year U.S. Treasury yield briefly flirted with 5% again today before settling at 4.995%—the highest level since July 2007.

The Clarity Act, the crypto industry’s top legislative priority, failed to advance on Tuesday after lawmakers raised questions about its ability to rein in public officials from profiting off of crypto projects. My colleague Joe Light reported that a procedural motion to advance the bill collapsed by a vote of 49 to 50.

The legislation as it is currently written would take most crypto trading out of the purview of securities regulators, among other provisions. The motion today needed at least 60 votes, and several Republican lawmakers joined Democrats in sinking the bill.

That deals a big regulatory blow to crypto industry. Lawmakers are unlikely to pick up the issue again before the November midterm elections.

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The Hot Stock: Skyworks Solutions +13.6%
The Biggest Loser: Coinbase Global -10.1%

Best Sector: Energy +2.3%
Worst Sector: Consumer Discretionary -1.8%

The Federal Reserve is expected to raise interest rates Wednesday for the first time in more than three years. For most investors, the key question isn’t what the Fed will do tomorrow, but whether or not more hikes will follow.

The Federal Open Market Committee is widely expected to raise the federal funds target range by a quarter of a percentage point, from 3.75% to 4%. The odds of a rate hike soared to 91% on Tuesday, up from 60% a week prior. 

The committee will issue its rate decision, along with an updated summary of economic projections, at 2 p.m. Eastern, followed by a press conference with Chairman Kevin Warsh at 2:30 p.m. 

History suggests the Fed won’t stop at just one September hike. Since the central bank began formally announcing its target rate in 1996, the vast majority of interest rate hiking cycles have included multiple increases. The only time the Fed raised rates in a “one and done” move was 1997.

“The debate has shifted from ‘if’ to ‘how much’ tightening this cycle will require to restore price stability,” writes Seema Shah, chief global strategist at Principal Asset Management. 

A one-and-done approach is unlikely, Shah notes, especially given that inflation has remained above the Fed’s 2% target for more than five years. Ongoing trade disruptions, the recent surge in oil prices, and rising prices of components tied to the AI buildout could add to those inflationary pressures. 

The bond market is also signaling that rates could have further to rise. The 2-year Treasury yield is now sitting roughly one percentage point above the current federal-funds target range of 3.5% to 3.75%. That gap suggests investors expect the Fed to raise rates by at least another half to three-quarters of a percentage point in the coming quarters.

But the debate around the correct monetary policy path is far more nuanced than the probabilities alone suggest. While many Fed watchers see valid reasons for officials to raise interest rates this week, others say it would be a mistake, given the current inflation backdrop.

“Hiking is the wrong choice,” write Standard Chartered Bank’s John Davies and Steve Englander. “The correct Fed policy decision in our view is straightforward—stay on hold until the noise from tariffs and data revisions dissipates.”

Lennar releases third-quarter fiscal-2026 earnings tomorrow.

The Census Bureau reports retail and food-service sales for August. Consensus estimate is for a 0.8% month-over-month increase following a 0.6% decline in July. Excluding autos and gas, retail sales are expected to increase 0.4%, compared with a 0.2% drop previously.

The National Association of Home Builders releases its Housing Market Index for September. The consensus call is for a 34 reading, one point less than in August. Readings below 50 indicate home builders are pessimistic about single-family housing markets in the near future.

The FOMC announces its monetary-policy decision at 2 p.m. Eastern followed by a press conference with Chairman Warsh that starts at 2:30 p.m. Eastern.

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