U.S. stocks close lower, Dow falls nearly 500 points as Warsh's first Fed meeting sends yields higher
Just after midnight Beijing time on June 18, U.S. stocks closed lower on Wednesday, with the Dow down about 500 points. Heavyweight tech stocks led the declines and Treasury yields surged. Several Fed officials signaled that rates may need to rise this year to curb inflation, leaving investors uncertain about the policy path.
The Dow fell 507.12 points, or 0.98%, to 51,492.55, after earlier hitting an intraday all-time high for a third straight record-setting 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 heavyweights led the retreat, with Microsoft, Meta Platforms, Alphabet and Amazon all ending lower. Hot IPO SpaceX also weighed on sentiment, falling for the first time since listing last Friday. Gains in chip stocks such as Intel and Micron helped cushion some of the broader losses.
This was the first Fed meeting chaired by the new Fed Chair Kevin Warsh. After a two-day meeting, the Fed kept rates unchanged in the 3.5% to 3.75% target range.
According to the Summary of Economic Projections, several Fed officials expect a rate hike in 2026. The median year-end estimate for the federal funds rate is now 3.8%, above the 3.4% forecast in March, signaling that the committee sees at least one hike in 2026.
Warsh said he did not submit a rate forecast, adding another layer of uncertainty.
After the decision, U.S. Treasury yields jumped, with the 2-year yield rising 16 basis points to 4.208%.
“The market reaction right now is mainly about the dot plot ... which is much more hawkish,” said Claudia Sahm, chief economist at New Century Advisors. “The inflation backdrop has changed a lot.”
Traders also focused on Warsh's repeated emphasis in his press conference on the Fed's commitment to “price stability,” suggesting he may not pursue rate cuts as many had expected simply because he was nominated by President Trump.
Jeffrey Gundlach, CEO of DoubleLine Capital, said: “He's definitely telling you he plans to achieve price stability. That means ... we won't have the kind of easy policy many expected from Chair Warsh, who people thought might cut rates the way everyone was betting on in Q1. He sounded nothing like that today.”
