2 Areas of Wall Street to Avoid This Fed Week

• Nasdaq-100 (NDX) shows serious underperformance following Fed rate hikes compared to general Fed meeting days, with tech stocks historically struggling when rates rise
• QQQ ETF faces triple headwinds: September averages a 1.8% loss over the past 10 years with only 40% win rate, upcoming midterm election volatility, and potential December rate hike
• Technical support for QQQ sits at $700 level (held since August) and 100-day moving average, with options traders heavily positioned in puts as top six open interest positions are all put contracts

Summary

Federal Reserve Rate Hike Expected

Markets are pricing in an 87% probability of a 25-basis-point Fed rate hike on Wednesday, September 2026—the first increase since 2023. This represents a sharp rise from 70% on Thursday and just 49% a week ago, driven by consecutive hotter-than-expected PPI and CPI readings.

Technology Sector at Risk

Historical analysis shows the Nasdaq-100 (NDX) significantly underperforms following rate hikes across multiple timeframes. The Invesco QQQ ETF, which tracks the NDX, faces technical pressure at the $700 support level established since August, with resistance around $740-$720 forming a potential double top. The 100-day moving average held this week but remains vulnerable.

Options traders are positioning defensively, with the top six QQQ open interest positions all being puts, led by December 660 strike puts. QQQ averages a 1.8% loss in September over the past decade, with only a 40% monthly win rate.

Market Implications

Senior Quantitative Analyst Rocky White notes that stocks typically struggle in weeks following rate hikes, though the impact is lessened when pessimism is already priced in. The Nasdaq shows particular weakness compared to broader market indices during Fed hiking cycles.

Additional headwinds include unfavorable September seasonality, upcoming midterm election volatility, and the possibility of another rate hike in December. The article also mentions underperformance in homebuilding stocks, specifically referencing Lennar.

Bottom Line: Tech-heavy indices and homebuilders represent two areas investors should approach cautiously amid the anticipated Fed tightening cycle.