U.S. stocks fell sharply as the Federal Reserve signaled a hawkish stance. Although the Fed kept interest rates steady, the possibility of rate hikes later this year dampened investor sentiment.
On June 17, the Dow Jones Industrial Average closed down 507.12 points (1.0%) at 51,492.55. The S&P 500 dropped 91.25 points (1.2%) to finish at 7,420.10, while the Nasdaq Composite fell 354.68 points (1.3%) to close at 26,021.66.
The market's focus was on the first Federal Open Market Committee (FOMC) meeting chaired by Kevin Warsh. The Fed maintained its benchmark interest rate at 3.50% to 3.75%, but the dot plot indicated that some members expect rate increases this year. Warsh's emphasis on the commitment to price stability also contributed to lowered expectations for rate cuts.
Treasury yields rose, with the sensitive two-year Treasury yield surpassing 4.1%, and the ten-year yield climbing to the mid-4.4% range. The increase in rates added pressure on growth and technology stocks, leading to a broad decline in the market.
Most sectors in the S&P 500 showed weakness, particularly communication services, regional banks, and housing-related stocks. The prospect of prolonged high interest rates led to selling pressure in sectors burdened by financial costs.
Among individual stocks, SpaceX, which had been strong since its recent IPO, fell about 5%. CME Group also saw declines following news of its CEO's resignation. In contrast, some semiconductor and AI infrastructure stocks showed relative strength during the trading session.
Expectations for easing geopolitical tensions in the Middle East did not prevent the market's decline. While discussions between the U.S. and Iran regarding a ceasefire memorandum of understanding stabilized international oil prices, the Fed reaffirmed its priority on achieving its inflation target, causing the market to react more sensitively to interest rate trajectories.
Looking ahead, the market is expected to gauge the Fed's potential for actual rate increases based on upcoming inflation and employment data. As the Fed shifts its policy direction from expectations of rate cuts to the possibility of prolonged tightening, the New York Stock Exchange is likely to experience volatility linked to Treasury yields and inflation indicators in the near term.
* This article has been translated by AI.
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