U.S. stocks close lower, Dow falls nearly 500 points: Fed meeting sends yields soaring
At around 2 a.m. Beijing time on June 18, U.S. stocks closed lower on Wednesday, with the Dow falling about 500 points. Mega-cap tech shares led losses, and Treasury yields surged. Several Federal Reserve officials hinted that rates could be raised this year to curb inflation, leaving investors uncertain about the path of monetary policy.
The Dow fell 507.12 points, or 0.98%, to 51,492.55, after setting an intraday all-time high earlier in the session. The Nasdaq fell 354.68 points, or 1.34%, to 26,021.65, and the S&P 500 fell 91.25 points, or 1.21%, to 7,420.
Major tech names led the declines, with Microsoft, Meta Platforms, Alphabet and Amazon all closing lower. Hot IPO name SpaceX also weighed on sentiment and fell for the first time since its debut last Friday. Gains in chip names such as Intel and Micron Technology helped limit part of the market's losses.
This was the first Fed meeting chaired by new Chair Kevin Warsh. After a two-day meeting, the Fed left rates unchanged in the 3.5% to 3.75% target range.
According to the Summary of Economic Projections, several Fed officials expect a hike in 2026. The median year-end projection for the federal funds rate is now 3.8%, up from 3.4% in March, implying the committee sees at least one hike needed in 2026.
Warsh said he did not submit a rate forecast, adding another layer of complexity to the outlook.
After the decision was released, U.S. Treasury yields jumped, with the 2-year yield up 16 basis points to 4.208%.
"Right now the market's reaction is mainly about the dot plot... and it's much more hawkish," said Claudia Sahm, chief economist at New Century Advisors. "The inflation picture has changed a great deal."
Traders also watched the way Warsh repeatedly stressed the Fed's commitment to "price stability" at his press conference, a sign that he may not deliver the rate cuts many had expected from a nominee of U.S. President Donald Trump.
"He is absolutely telling you that he intends to deliver price stability. That means... we're not going to see the kind of easy policy that Chair Warsh might have been expected to pursue when everyone was betting on cuts in the first quarter," said Jeffrey Gundlach, CEO of DoubleLine Capital. "He did not sound anything like that today."
