U.S. Stocks Slip As Markets Turn Cautious Ahead Of The Federal Reserve Decision

U.S. equities ended Monday lower as traders adopted a defensive stance ahead of this week’s major Federal Reserve policy announcement. After several days of strong gains driven by rate-cut optimism, markets shifted into consolidation mode, with profit-taking emerging across key sectors.

The S&P 500 and Nasdaq 100 both retreated, weighed down by softness in tech and communication services. Investors showed a clear preference for defensives, with utilities and healthcare seeing modest inflows. The rotation reflects rising uncertainty about how aggressively the Fed intends to ease policy in early 2026.

Bond markets echoed the cautious tone.

Treasury yields edged higher following last week’s sharp decline, as traders trimmed positions ahead of the Fed’s updated communication. The yield curve steepened slightly, signaling expectations of more near-term volatility around monetary guidance.

FX markets were similarly muted.

The U.S. dollar found temporary support after several weeks of declines, while the euro and yen pulled back modestly. Commodity currencies traded mixed, with the Canadian dollar lagging as oil prices drifted lower.

Meanwhile, corporate earnings updates were lighter than usual, leaving macro forces in control of the session. Trading volumes thinned during U.S. afternoon hours, suggesting participants were unwilling to take on new risk before Wednesday’s announcement.

Across assets, sentiment is clearly in “wait-and-see” mode.

Markets are pricing in a high probability of continued caution from the Fed—acknowledging softening economic data but avoiding any commitments to a rapid easing cycle.

The next major catalysts now include:

• the Fed statement and press conference,

• upcoming inflation data delayed by the government shutdown,

• and updated labor-market trends.

Until clarity arrives, U.S. equities are likely to remain sensitive to even minor shifts in rate expectations.