Fed projections – U.S. stocks fell Wednesday after Federal Reserve projections showed many policymakers expect at least one interest-rate increase this year to help restrain inflation. The drop came as Treasury yields rose and traders sharply boosted bets on a federal funds rat
NEW YORK — The market couldn’t hold its early footing after the Federal Reserve’s projections landed, and by the close, major indexes were decisively lower.
The S&P 500 slid 1.2%, falling 91.25 points to 7,420.10 after briefly rising earlier in the session. The Dow Jones Industrial Average flipped from a gain of 280 points in the morning to a drop of 507 points, or 1%, ending at 51,492.55. The Nasdaq composite sank 1.3%, or 354.69 points, to 26,021.66.
Investors were reacting to the Fed’s latest quarterly outlook showing that nine of 18 policymakers foresee at least one increase to the central bank’s main interest rate this year. The move matters because higher rates can slow accelerating prices at cash registers. but they also tend to cool the economy and pull down the value of investments.
Chairman Kevin Warsh, the Fed’s leader, was a standout in the projections. In his first press conference as head of the U.S. central bank, Warsh did not provide a forecast for where the federal funds rate may end 2026. Instead. he focused on how the Fed communicates. saying he is considering a revamp of the way the central bank speaks to financial markets and to U.S. households and businesses.
One of Warsh’s first moves was to end the inclusion of hints in Fed statements about where interest rates may be heading in the future—known as “forward guidance.” Warsh said he wants Wall Street to respond to incoming reports about inflation. the job market and other economic data based on how those developments should affect prices for stocks. bonds and other investments. rather than on how traders expect the Fed to react.
He also said the Fed could adjust its usual three-month release of projections that show where Fed officials expect interest rates. the economy and inflation to go. For now. stocks zigzagged after the update. rising and falling several times as traders tried to calibrate what the projections really meant.
Still, Warsh cautioned that he “didn’t hear tons of conviction” behind the projections. The Fed simultaneously kept the federal funds rate steady at this meeting, as it has all year so far.
In the bond market, the shift was clearer. Treasury yields climbed. The 10-year Treasury yield rose to 4.49% from 4.43% late Tuesday. a benchmark that influences rates for mortgages and other loans for U.S. households and businesses. The two-year Treasury yield, which more closely tracks expectations for Fed action, jumped to 4.21% from 4.05%.
Traders moved quickly as well. The probability of at least one increase to the federal funds rate this year rose to 84% from 59.5% a day earlier, according to data from CME Group.
Across global bond markets, high yields linked to worries about inflation have already been pressuring economies and undercutting prices for a wide range of investments.
On Wall Street, individual companies amplified the pressure. SpaceX gave back an early gain and fell 4.9% for its first loss since its high-profile debut on the U.S. stock market last week. Microsoft dropped 3.8%, Amazon fell 3.5%, and Nvidia sank 1.3%, each weighing on the S&P 500.
Some results cut through the gloom. La-Z-Boy rose 14.8% after reporting stronger profit and revenue for the latest quarter than analysts expected. The company said it benefited from revenue generated at newly opened stores. though Chief Financial Officer Taylor Luebke said the company continues to have “a measured view” of the broad sales environment.
The market’s pullback also played out alongside mixed signals about the broader economy. A report released Wednesday said retailers across the country saw their revenue grow at a faster pace in May than economists expected. offering hope that solid consumer spending can keep the economy supported. At the same time, high inflation has made U.S. shoppers feel more discouraged about their finances.
Oil prices were steadier on Wednesday after slides earlier in the week. The change came with optimism surrounding a tentative U.S.-Iran deal aimed at restoring global oil flows. Under the deal. Iran is set to take steps to reopen the Strait of Hormuz once it is signed. which would allow oil tankers to deliver crude from the Persian Gulf again and potentially take some pressure off inflation. Brent crude rose 0.7% to $79.55. It remains above its roughly $70 price from before the war. but far below its $100-plus level from a few weeks ago.
Overseas, markets were mixed. South Korea’s Kospi jumped 1.6%, while Hong Kong’s Hang Seng fell 0.7%.
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Federal Reserve interest rates inflation S&P 500 Dow Nasdaq Treasury yields Kevin Warsh forward guidance SpaceX Microsoft Amazon Nvidia La-Z-Boy