(Bloomberg) -- The US stock market remains on edge ahead of Wednesday’s Federal Reserve announcement, with investors expecting a 75 basis-point increase in rates, which in turn will add more pressure on growth stocks and corporate profit margins.

Stocks have tumbled since Friday in anticipation of an aggressive move by the Fed in its fight against inflation, with the S&P 500 Index entering bear market territory. 

Apple Inc., Microsoft Corp. and other technology stocks have slumped to new lows as US Treasury yields have soared. Homebuilders and lenders have tumbled even more as investors bet that higher borrowing costs will slow down the US housing market.

The recent selloff could potentially set the stage for a rally if the Fed does indeed raise rates by 75 basis points, which would help re-establish the central bank’s inflation fighting bonafides, according to Michael Mullaney, director of global market research at Boston Partners. 

On the flip side, if the central bank raises rates by 50 basis points, unless Fed Chair Jerome Powell “comes with real hawkish content afterwards, I think it’s going to be taken as somewhat dovish and letting inflation get away,” Mullaney said.

Here’s a look at sectors where the stakes for the Fed’s rate decision are high.


Tech stocks have been among the hardest hit amid soaring U.S. Treasury yields, which dent the present value of profits expected to be delivered far in the future. The tech-heavy Nasdaq 100 is down 31% this year led by DocuSign Inc. and Netflix Inc. that are more focused on revenue growth than profitability.

Higher rates have also taken a toll on behemoths like Amazon.com Inc., which is on the verge of seeing its market value sink below $1 trillion for the first time since 2020 as it grapples with higher costs and slowing growth. The stock is down 45% from last year’s record.

Most on Wall Street don’t expect a sustained rebound in tech stocks until there are signs inflation is slowing down.

Read more: Big Tech’s Floor Collapses on Renewed Fears of Bigger Rate Hikes

Consumer Discretionary

After rallying earlier this year, consumer discretionary stocks are now under pressure as rising rates dampen consumer sentiment and spending. The S&P 500 Consumer Discretionary Index has tumbled 33% this year after surging 24% in 2021.

Shares of furniture and apparel retailers, such as RH and Abercrombie & Fitch Co., could experience more selling if the Fed signals that consumers are cutting back. Winners could include companies that sell a greater mix of staples products, like grocers including Kroger Co., and Walmart Inc. and Costco Wholesale Corp.

Wall Street has been changing its tune on the sector. BofA recently downgraded its recommendation on consumer electronics retailer Best Buy Co. and raised Tractor Supply Co., which sells farm supplies and animal feed, as the firm sees US consumers shifting their budgets to staple items.

Read more: If You Thought the Tech Rout Was Bad, Spare a Dime for Retailers

Banks and Homebuilders

Rising rates are a double edged sword for banks. While the lenders are typically viewed as one of the biggest beneficiaries from a rising interest rate environment, the sector has been under pressure as concerns grow about a potential US recession and drop in mortgage lending. 

The S&P 500 Banks Index has fallen 25% this year. All six of the largest US bank stocks are down by at least 20% in 2022, with JPMorgan Chase & Co. and Bank of America Corp. down more than 28%.

For homebuilders, rising borrowing costs and elevated home prices have spurred concerns over housing market demand. Lennar Corp. and D.R. Horton Inc. have tumbled this year, pummeled by rising mortgage rates. 

Read more: Mortgage Stocks Slump as Rate Worries Sour Investor Sentiment

Precious Metals Miners

Gold mining stocks have lost their appeal as an inflation hedge as interest rates have climbed. The VanEck Gold Miners ETF is down more than 7% in 2022 after rallying earlier in the year. Kinross Gold Corp. has slumped 29% while Wheaton Precious Metals Corp. and Agnico Eagle Mines Ltd. have dropped more than 8%.

The “only thing keeping gold above” a technical support level of $1,810 per ounce is inflation, Sevens Report founder Tom Essaye wrote in a Tuesday note. That could change Wednesday as rising interest rates mean gold “is likely to break below” $1,800.

©2022 Bloomberg L.P.