U.S. stocks close lower, Dow falls 500 points; hawkish Fed signals lift Treasury yields
At around 2 a.m. Beijing time on June 18, U.S. stocks closed lower on Wednesday, with the Dow down about 500 points. Tech-heavy stocks led the decline and Treasury yields surged. Several Federal Reserve officials hinted that rates could rise 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. Earlier in the session it hit an all-time intraday high, its third straight trading day setting a record. 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 names led losses, with Microsoft, Meta Platforms, Alphabet and Amazon all closing lower. Hot IPO SpaceX also hurt sentiment, falling for the first time since its listing last Friday. Gains in chip stocks such as Intel and Micron Technology helped limit some of the broad market losses.
This was the first Fed meeting chaired by new Fed Chair Kevin Warsh. After a two-day meeting, the Fed kept interest rates unchanged 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 projection for the federal funds rate is now 3.8%, above the 3.4% forecast in March, suggesting the committee believes at least one hike may be needed in 2026.
Warsh said he did not submit a rate forecast, making the outlook even more complicated.
After the decision was announced, U.S. Treasury yields jumped, with the 2-year yield rising 16 basis points to 4.208%.
“Right now the market reaction is mainly to the dot plot... it is much more hawkish,” said Claudia Sahm, chief economist at New Century Advisors. “The inflation picture has changed a lot.”
Traders also focused on Warsh’s repeated emphasis at the press conference that the Fed is committed to “price stability,” suggesting he may not push for rate cuts as many had expected of a nominee picked by President Trump.
Jeffrey Gundlach, CEO of DoubleLine Capital, said: “He is absolutely telling you that he plans to restore price stability. That means... we won’t get the kind of easy policy people expected from Chairman Warsh when everyone was betting on cuts in the first quarter. He did not sound like that at all today.”
