NEW YORK, May 16, 2026, 05:16 EDT
Markets betting on Fed moves have backed away from rate-cut hopes that pushed U.S. stocks. Polymarket gives a 69.2% chance of no Federal Reserve cuts in 2026, and Kalshi’s odds for no cuts this year are about the same.
Tech stocks slid Friday as the Dow, S&P 500 and Nasdaq all dropped more than 1%. This wasn’t only traders taking profits after recent highs. Oil prices and Treasury yields rose, putting pressure on the rate-sensitive tech sector that’s led gains this year. Kenny Polcari, chief market strategist at Slatestone Wealth, said the AI trade had run “way ahead of itself.” Reuters
Bad timing for investors. Nvidia reports next week, and so do Walmart, Home Depot, Target and TJX. The numbers will give a fast read on the two themes moving stocks—AI spending and how shoppers are holding up as energy bills stay high. “The rally was being driven by a smaller set of names and [that is] not necessarily a healthy market,” said Patrick Ryan, chief investment strategist at Madison Investments. Reuters
Prediction markets let people trade contracts on real events. If a contract trades at 69 cents, that’s seen as a 69% chance. On Polymarket, trading in the 2026 Fed-cut market showed 16% odds for one 25-basis-point cut and had $26.7 million in volume.
Kalshi, the U.S.-regulated event contract platform overseen by the Commodity Futures Trading Commission, showed its “exactly zero cuts” market last near 68%. That’s about in line with Polymarket, though the exchanges have different trader groups and market setups. Kalshi
Fed rate markets are tracking similar moves. According to CME FedWatch, traders are pricing in about a 60% chance of the Fed funds rate being up 25 basis points by January. Odds for a hike in December hovered near 50-50. Bank of America analysts said the story had changed “from stagflation to reflation” after recent spending and inflation numbers ran hotter. Reuters
Near-term Fed expectations look stuck. Odds for no change at the June 16-17 meeting were at 98.1% on Polymarket and 96.5% on Kalshi, according to DeFi Rate’s odds page tracking Fed-decision markets. The focus is shifting to 2026 for any bigger move, not the next Fed release.
Equity-linked contracts showed a mixed picture. On the Coinbase prediction-market page for the Kalshi-coded S&P 500 “finish positive” contract, “Yes” traded at 72 cents for the index closing 2026 above 6,845.50. Related S&P markets on the same platform were pricing higher odds for the index finishing above both the year-end and month-end marks. Coinbase
Polymarket’s S&P 500 page recorded $459,000 in volume for its May SPY market. The displayed probability was 70% for a move below a $730 threshold. SPY, the ETF that follows the S&P 500, is used by traders as a fast stand-in for the index.
Straight bearish bets aren’t what’s happening. The market’s saying the margin for error is shrinking: the S&P 500 might still end the year up, but if oil and inflation settle in higher, the Fed might not be able to cut rates now.
Prediction markets can shift quickly, and price signals are vulnerable to swings from liquidity, accessibility, and fees. Polymarket says its odds don’t guarantee outcomes, while Kalshi cautions that event contracts are risky and losses are possible.
Wall Street is waiting for two things now. Nvidia needs to keep the AI story going, and retailers have to show shoppers are handling higher fuel prices. If both deliver, the rally could hold. If they don’t, the no-cut trade on Kalshi and Polymarket might stop looking like a sideshow and turn into the main event.
