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Federal Reserve · Inflation · Interest Rates · Stock Market
U.S. stocks slumped after the Federal Reserve's projections indicated nine of 18 policymakers foresee at least one interest rate hike in 2026, causing the S&P 500 to drop 1.2%, the Dow Jones Industrial Average to fall 1.0%, and the Nasdaq composite to sink 1.3%.
Fed Chairman Kevin Warsh, in his first press conference, ended "forward guidance" on future rate hints, aiming for market reactions based on economic data rather than Fed expectations. This communication shift, coupled with the rate hike projections, led to increased trader bets for a 2026 rate hike, now at an 84% probability according to CME Group data, up from 59.5% a day earlier.
Bond yields climbed, with the 10-year Treasury rising to 4.49% from 4.43% and the two-year to 4.21% from 4.05%. Major tech stocks like Microsoft, Amazon, and Nvidia were significant drags on the S&P 500, while La-Z-Boy jumped 14.8% on stronger-than-expected profit and revenue.
Retail revenue growth in May offered some economic support, and oil prices steadied on optimism about a tentative U.S.-Iran deal to reopen the Strait of Hormuz, potentially easing inflation.
