US Stocks Fell, Dow Drops Nearly 500 Points; Warsh Debut Triggers Yield Surge

June 18 Beijing time, US stocks fell on Wednesday, with the Dow dropping about 500 points. Tech heavyweights led the decline while Treasury yields surged. Several Fed officials hinted at possible rate hikes this year to curb inflation, causing investor uncertainty about the monetary policy path.

The Dow fell 507.12 points, or 0.98%, to 51,492.55, having hit a record intraday high earlier; 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. Hot IPO stock SpaceX also weighed on sentiment, falling for the first time since its listing last Friday. Chip stocks like Intel and Micron rose, helping to limit the broader decline.

This was the first Fed meeting chaired by new Chairman Kevin Warsh. After the two-day meeting, the Fed held interest rates at 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 estimate 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 an interest rate forecast, 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 reaction right now 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 noted Warsh's emphasis on the Fed's commitment to "price stability" several times during the press conference, suggesting he may not pursue rate cuts as many expected from a nominee of President Trump.

DoubleLine Capital CEO Jeffrey Gundlach said: "He's absolutely telling you he plans to achieve price stability. That means...we won't have the loose monetary policy that everyone expected Chairman Warsh might pursue when they were betting on rate cuts earlier this year. He didn't sound like that at all today."