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- Following the failure of SVB, some commentators predicted a pause in Fed rate hikes.
- But DataTrek expects as much as a 5% sell-off in stocks if the Fed doesn't raise rates this month.
- A pause "would be a sign that they knew other US regional banks were on the precipice of failure."
The stock market could see a sell-off if the Federal Reserve decides against an interest rate hike at the March meeting, as it would suggest more banks are teetering, according to DataTrek Research.
Before Silicon Valley Bank failed last week, markets widely expected a Fed rate hike of 25 or even 50 basis points this month. Fed officials also signaled more increases were coming.
Now the odds that the Fed holds rates steady are 43%, while the odds of a quarter-point increase are 57%, according to CME's FedWatch Tool.