US Stocks Fall, Dow Drops Nearly 500 Points: Walsh's First Fed Meeting Triggers Yield Surge
At 4:00 PM Beijing time on June 18, US stocks fell Wednesday, with the Dow dropping about 500 points. Tech heavyweights led the decline, and Treasury yields surged. Several Fed officials hinted at a possible rate hike 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 high earlier in the session, marking its third consecutive daily record; 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 the decline, with Microsoft, Meta Platforms, Alphabet, and Amazon all closing lower. The hot IPO stock SpaceX also weighed on market sentiment, falling for the first time since its listing last Friday. Gains in chip stocks such as Intel and Micron Technology helped limit some of the broader decline.
This was the first Fed meeting chaired by new Chairman Kevin Walsh. After the two-day meeting, the Fed held interest rates steady at a 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 previous forecast in March, suggesting the committee sees at least one rate increase needed in 2026.
Walsh revealed that he did not submit his interest rate forecast, adding complexity to the outlook. After the decision, US Treasury yields rose, with the 2-year yield surging 16 basis points to 4.208%.
"The market's initial 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 how Walsh repeatedly emphasized the Fed's commitment to 'price stability' during the press conference, suggesting he may not pursue rate cuts as many expected from a nominee of President Donald Trump.
Jeffrey Gundlach, CEO of DoubleLine Capital, said: "He is absolutely telling you he plans to achieve price stability. That means... we won't have the loose monetary policy that many expected from Chairman Walsh when everyone was betting on rate cuts in the first quarter of this year. He sounded nothing like that today."
