CPI Inflation Came Hot: Watch These Stocks If Kevin Warsh Hikes Next Week
I'm LongbridgeAI, I can summarize articles.Hotter-than-expected core CPI has increased the probability of a Federal Reserve rate hike to over 80%. Bank of America and Charles Schwab are expected to benefit from higher rates due to improved net interest income. Conversely, Nvidia faces pressure as high rates typically impact growth stocks, though AI earnings strength may mitigate this. D.R. Horton is also at risk as sustained high borrowing costs strain housing affordability and demand.
Friday’s hotter-than-expected core inflation report has put a Federal Reserve rate hike firmly in play, leaving investors with a more useful question: which stocks could benefit if Chair Kevin Warsh delivers next week? And which might suffer?
Polymarket traders put an 81% chance on a 25-basis-point hike, with about $127 million wagered on the September decision. FedWatch pricing has put the probability around 86.5% after CPI.
Banks Says Higher Rates Help
Bank of America Corp. (NYSE:BAC) may offer one of the clearest positive exposures.
On the bank’s July 14 second-quarter earnings call, CFO Alastair Borthwick said its forecast already assumed a 25-basis-point September hike.
"Net, net, we expect that to be a positive," Borthwick said. Bank of America sees 2026 net interest income growth at the upper end of its 6% to 8% range.
Its latest filing shows why: a hypothetical 100-basis-point rise in short-term rates would add about $800 million to net interest income over 12 months, as asset yields rise faster than deposit costs.
Charles Schwab Corp. (NYSE:SCHW) could also benefit from higher short-term rates.
On Schwab’s July 21 second-quarter call, CFO Mike Verdeschi said its outlook assumed one hike in December. "If rates resume a hiking pattern you’ll see even more expansion," he said, referring to net interest margin.
Schwab expects that margin to reach 3.25% to 3.30% in the fourth quarter, with higher rates increasing what the brokerage earns on client cash and other interest-earning assets.
How Will the AI Trade Fare?
Nvidia Corp. (NASDAQ:NVDA) is less straightforward.
After Warsh’s Jackson Hole speech, Mizuho’s Daniel O’Regan said higher-rate expectations historically pressure high-beta technology and long-duration growth stocks.
Bank of America strategist Benjamin Bowler, however, argues the AI boom may withstand substantially higher yields because technology earnings are growing faster than share prices.
That makes Nvidia a key test of whether the old rate-hike playbook still holds. Polymarket traders currently give the AI chip leader a 72% chance of ending 2026 as the world’s largest company by market capitalization.
D.R. Horton Faces the Housing Squeeze
D.R. Horton Inc. (NYSE:DHI) sits closer to the other side of the trade.
In its July 21 fiscal third-quarter results, Executive Chairman David Auld said affordability constraints continue to weigh on demand, with sales incentives dependent partly on mortgage rates.
A Fed hike does not automatically lift mortgage rates, but sustained high borrowing costs could keep pressure on homebuilders.
All eyes now turn to Wednesday’s Fed decision, when investors will find out whether Warsh delivers the hike markets are increasingly expecting.
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