The Federal Reserve's decision to hold rates steady at 5.25% has sent shockwaves through the small-cap sector. The Russell 2000 has plummeted 8% in just two weeks, reflecting growing fears of a credit crunch for regional banks and smaller enterprises dependent on floating-rate debt.
Core services inflation remains stubbornly high at 4.2%, driven primarily by shelter and healthcare costs. This data point has effectively killed the "pivot" narrative for Q4 2025. The yield curve remains inverted, with the 2s10s spread widening to -45bps.
Sector Analysis: We are seeing a massive rotation into 'Quality'—companies with strong balance sheets and high free cash flow yields. Mega-cap tech (AAPL, MSFT) is acting as a safe haven, while unprofitable tech and highly leveraged industrials are being sold off aggressively.