Wall Street closed sharply lower after the US Federal Reserve signalled that interest rates could rise later this year, prompting investors to reassess expectations for monetary policy.
The Dow Jones Industrial Average fell 507.12 points, or 0.98%, to 51,492.55, snapping a run of two consecutive record closes. The S&P 500 lost 91.25 points, or 1.21%, to 7,420.10, while the Nasdaq Composite declined 354.69 points, or 1.34%, to 26,021.66.
The sell-off followed the Federal Reserve’s decision to keep benchmark interest rates unchanged at 3.50%-3.75%, although updated projections showed that nine policymakers expect at least one rate increase before the end of 2026 to contain inflation.
In his first policy meeting as Fed chairman, Kevin Warsh emphasised the central bank’s commitment to price stability and unveiled a review of key aspects of monetary policy.
Following the meeting, futures markets shifted towards expecting a rate hike as early as September, according to CME Group’s FedWatch tool. Expectations that rates would remain unchanged by year-end dropped sharply from around 40% on Tuesday to 13%.
All 11 major sectors of the S&P 500 ended in negative territory, with communication services emerging as the worst performer with losses of nearly 3%. Industrials proved relatively resilient, declining just 0.1%.
Regional banks came under pressure, with the KBW Regional Banking Index falling 1.8%, while the S&P 500 bank index slipped 0.2%. The State Street SPDR S&P 500 Homebuilders ETF also dropped 2.3%, reflecting concerns that higher borrowing costs could weigh on the housing market.
Market sentiment had improved in recent sessions after easing tensions between the US and Iran pushed oil prices lower. However, crude prices regained ground after US President Donald Trump warned that military action against Iran could resume if a recently announced ceasefire agreement fails.
Among individual stocks, SpaceX fell 4.9%, marking its first decline since making its market debut last week. CME Group dropped 3.5% after announcing that chief executive Terry Duffy would step down in March next year and become executive chairman.
Meanwhile, Allbirds surged 39% after the footwear company announced a rebranding to Smartbird and appointed former Amazon executive Nadia Carlsten as its new chief executive.
