Fed meeting triggers US stock pullback, Dow falls nearly 500 points

June 18, Beijing time – US stocks fell on Wednesday, with the Dow dropping about 500 points. Major tech stocks led declines, and bond 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 in the session, marking its third consecutive record high; 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 weighed on sentiment, falling for the first time since its listing on Friday. Chip stocks such as Intel and Micron Technology helped limit some of the broader market's losses.

This was the first Fed meeting chaired by new Fed Chair Kevin Warsh. After the two-day meeting, the Fed held rates steady in the 3.5%-3.75% target range.

According to the economic projections summary, 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 March forecast, suggesting the Committee sees at least one rate hike needed in 2026.

Warsh revealed he did not submit a rate projection, further complicating the outlook.

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

"The market's initial reaction is mainly to the dot plot... its stance is much more hawkish," said Claudia Sahm, chief economist at New Century Advisors. "The inflation situation has changed a lot."

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 is absolutely telling you that he plans to achieve price stability. That means... we won't have as loose monetary policy as many expected when everyone bet on rate cuts in the first quarter of this year, thinking Chair Warsh might do so. He sounded nothing like that today."