US Stocks Fall: Dow Down Nearly 500 Points, Warsh Debut Sparks Yield Surge
On June 18 Beijing time, US stocks closed lower Wednesday, with the Dow falling about 500 points. Major tech stocks 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 all-time high earlier in the session, marking the third consecutive trading 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 closing lower. Hot IPO stock SpaceX also dampened market sentiment, falling for the first time since listing last Friday. Gains in chip stocks such as Intel and Micron helped curb some of the broader market's losses.
This was the first Fed meeting chaired by new Chairman Kevin Warsh. After the two-day meeting, the Fed held rates steady in the target range of 3.5% to 3.75%.
According to the Summary of Economic Projections, several Fed officials expect rate hikes in 2026. The median year-end federal funds rate projection is now 3.8%, up from 3.4% in the previous forecast in March, suggesting the committee sees at least one rate hike 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 is reacting primarily to the dot plot… it's much more hawkish,” said Claudia Sahm, chief economist at New Century Advisors. “The inflation situation has changed dramatically.”
Traders also focused on Warsh's repeated emphasis on the Fed's commitment to “price stability” during the press conference, suggesting he may not pursue rate cuts as many expected from a Trump nominee.
Jeffrey Gundlach, CEO of DoubleLine Capital, said: “He's absolutely telling you he plans to achieve price stability. That means… we won't see the loose monetary policy that people expected when everyone was betting on rate cuts in the first quarter. He didn't sound like that today at all.”
