What Happened?
A number of stocks fell in the afternoon session after the Fed signaled rate cuts were off the table for 2026. Major Wall Street banks, including Goldman Sachs and Bank of America, pushed back their forecasts for Federal Reserve interest-rate cuts.
The revised timelines, pointed to December 2026 instead of September, after stronger-than-expected jobs and inflation data suggested the economy might not be cooling enough to warrant earlier action from the central bank. This shift in expectations led to a rise in Treasury yields. Some analysts at Bank of America even noted that the risk of the Fed hiking rates again might be 'underpriced' by the market, signaling a potentially prolonged period of higher interest rates.
Banks earn money on the difference between what they charge borrowers and pay depositors, the net interest margin. Rate cuts are a mixed signal: they compress margins but stimulate loan demand. With the Fed signaling no cuts, banks lose the demand catalyst needed to grow lending volume.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Thrifts & Mortgage Finance company Franklin BSP Realty Trust (NYSE: FBRT) fell 3%. Is now the time to buy Franklin BSP Realty Trust? Access our full analysis report here, it’s free.
- Regional Banks company Coastal Financial (NASDAQ: CCB) fell 3%. Is now the time to buy Coastal Financial? Access our full analysis report here, it’s free.
Zooming In On Coastal Financial (CCB)
Coastal Financial’s shares are somewhat volatile and have had 14 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock dropped 3.2% on the news that the renewed flare-up in the U.S.-Iran conflict sent oil prices sharply higher and pushed Treasury yields toward nine-month highs, reigniting fears of stagflation.
Bank earnings are highly sensitive to the macro backdrop, and a yield curve being driven up by inflation expectations rather than healthy growth is a poor combination for the sector. It raises funding costs, pressures the value of existing loan and securities portfolios, and increases the risk of credit deterioration as consumers and corporate borrowers absorb a fresh oil tax.
Coastal Financial is down 37.3% since the beginning of the year, and at $70.99 per share, it is trading 40.3% below its 52-week high of $118.97 from January 2026. Despite the year-to-date decline, investors who bought $1,000 worth of Coastal Financial’s shares 5 years ago would now be looking at an investment worth $2,275.
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