Striker Fletcher has struggled to make an impact at Molineux since his summer move from Burnley for whom he scored 13 goals last season. He was initially troubled by an ankle injury and was then played out wide rather than in a forward role.
However, McCarthy said: "He lost a fair bit of weight, but he's looking much better and he looks sharp. He'll be fine and all that was written about him leaving was nonsense. There's no chance of him going nowhere."
He continued: "I said to him (on Thursday): 'I bought you and you're different class.' I told him I don't believe one word of what was in the papers because there aren't any quotes from him anyway.
"I said: 'If anyone is being mischievous it doesn't matter to me because you're staying here, you're going to play so get yourself back in the team and play like I know you can.'"
McCarthy must wait to see if he can retain the services of Chelsea defender-midfielder Michael Mancienne on loan for the remainder of the season.
Mancienne has returned to his parent club to be assessed after suffering a knee injury. But the Blues can also recall Mancienne from a loan spell at Wolves in January if they so wish.
McCarthy said: "Michael has gone back to Chelsea for now because they want to have a look at him. They want to examine him and assess him and I need to speak to someone there and find things out.
"We've got him on loan but he's their player so we have to be conscious of that. He's got quite a swollen tendon on his knee so we don't know the timescale yet.
"As part of the loan deal there is a date when he can be recalled, if they wanted to do that."
Source: PA
Source: PA