US Stocks Fall, Dow Down ~500 pts: Yields Surge After Warsh's First Fed Meeting
At the close on Wednesday, June 18, US stocks fell, 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 earlier—its third consecutive session record high; the Nasdaq dropped 354.68 points, or 1.34%, to 26,021.65; the S&P 500 lost 91.25 points, or 1.21%, to 7,420.
Major tech giants led declines, with Microsoft, Meta Platforms, Alphabet, and Amazon all falling. Hot IPO stock SpaceX also weighed, falling for the first time since its debut last Friday. Gains in chip stocks like Intel and Micron helped limit some of the broader market decline.
This was the first Fed meeting chaired by new Chair Kevin Warsh. After the two-day meeting, the Fed held rates steady at 3.5% to 3.75%.
According to the economic projections summary, several Fed officials expect rate hikes in 2026. The median year-end federal funds rate estimate is now 3.8%, up from 3.4% in the March projection, suggesting the committee sees at least one hike needed in 2026.
Warsh revealed he did not submit a rate forecast, 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 reaction is mainly to the dot plot... which 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 on the Fed's commitment to "price stability" in his press conference, suggesting he may not deliver rate cuts as many expected from a Trump nominee.
Jeffrey Gundlach, CEO of DoubleLine Capital, said: "He is definitely telling you he plans to achieve price stability. That means... we won't have the loose monetary policy that everyone expected Chair Warsh might adopt when they were betting on rate cuts in the first quarter. He sounded nothing like that today."
