US Stocks Fall, Dow Drops Nearly 500 Points; Warsh Debut Spurs Yields Surge

Beijing time June 18 early morning, US stocks fell Wednesday, the Dow dropped about 500 points. Tech heavyweights led declines, 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 early in the session, the third straight day of record highs; 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 heavyweights led declines, with Microsoft, Meta Platforms, Alphabet and Amazon all falling. Hot IPO stock SpaceX also weighed on sentiment, falling for the first time since its listing 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 Chairman Kevin Warsh. After a two-day meeting, the Fed held interest rates steady 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 federal funds rate estimate is now 3.8%, up from 3.4% in the March forecast, suggesting the committee sees at least one rate hike needed in 2026.

Warsh revealed he did not submit a rate forecast, adding complexity to the outlook.

Following the decision, US Treasury yields jumped, with the 2-year yield rising 16 basis points to 4.208%.

"The market reaction is primarily to the dot plot... which is much more hawkish," said Claudia Sahm, chief economist at New Century Advisors. "The inflation picture has changed significantly."

Traders also focused on Warsh's repeated emphasis on the Fed's commitment to "price stability" during the press conference, suggesting he may not push for rate cuts as many expected from a Trump nominee.

DoubleLine Capital CEO Jeffrey Gundlach said: "He is absolutely telling you he plans to achieve price stability. That means... we won't have the kind of loose policy that might have been expected from Chairman Warsh when everyone was betting on rate cuts in Q1 this year. He didn't sound like that today."