US Stocks Fall, Dow Drops Nearly 500 Points, Yields Surge After Fed Meeting
At 6:18 PM Beijing time on June 18, US stocks fell on Wednesday, with the Dow dropping about 500 points. Tech heavyweights led declines, and Treasury yields surged. Several Fed officials hinted at possible rate hikes this year to curb inflation, leaving investors uncertain about the monetary policy path.
The Dow fell 507.12 points, or 0.98%, to 51,492.55, after hitting an intraday record high earlier in the session, marking its third straight day of record highs. The Nasdaq fell 354.68 points, or 1.34%, to 26,021.65. The S&P 500 fell 91.25 points, or 1.21%, to 7,420.
Major tech heavyweights led declines, with Microsoft, Meta Platforms, Alphabet, and Amazon all closing lower. Hot IPO stock SpaceX also dampened sentiment, falling for the first time since its listing Friday. Gains in chip stocks such as Intel and Micron Technology helped limit some of the broader market declines.
This was the first Fed meeting chaired by new Fed Chair Kevin Warsh. After the two-day meeting, the Fed held rates steady in the target range of 3.5% to 3.75%.
According to the Summary of Economic Projections, several Fed officials expect a rate hike in 2026. The median year-end federal funds rate estimate is now 3.8%, up from 3.4% in the March forecast, suggesting the committee sees the need for at least one rate hike in 2026.
Warsh revealed he did not submit a rate projection, adding complexity to the outlook.
After the decision, US Treasury yields jumped, with the 2-year yield rising 16 basis points to 4.208%.
"The market's initial reaction is mainly to the dot plot... its stance is much more hawkish," said Claudia Sahm, chief economist at New Century Advisors. "The inflation picture has changed significantly."
Traders also focused on Warsh's repeated emphasis on the Fed's commitment to "price stability" in his press conference, signaling he may not pursue rate cuts as many had expected from a nominee of President Trump.
Jeffrey Gundlach, CEO of DoubleLine Capital, said, "He's absolutely telling you he plans to achieve price stability. That means... we won't see the accommodative monetary policy that everyone expected from Chair Warsh when they were betting on rate cuts in the first quarter. He sounded nothing like that today."
