US Stocks Fall, Dow Drops Nearly 500 Points: Treasury Yields Surge After Warsh's Debut

At 4:00 PM ET on Wednesday, June 17, US stocks fell, with the Dow down about 500 points. Major tech stocks led the decline, and Treasury yields soared. 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 earlier in the session, marking the third straight 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 stocks led the decline, with Microsoft, Meta Platforms, Alphabet, and Amazon all falling. Hot IPO stock SpaceX also dampened sentiment, falling for the first time since its IPO last Friday. Chip stocks such as Intel and Micron Technology rose, helping to offset some of the market's losses.

This was the first Fed meeting chaired by new Chair Kevin Warsh. After the two-day meeting, the Fed held rates steady at 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 forecast is now 3.8%, up from 3.4% in the March projection, suggesting the committee sees at least one rate hike needed in 2026.

Warsh revealed he did not submit a rate forecast, adding to the uncertainty.

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 picture has changed a lot.'

Traders also focused on Warsh's repeated emphasis on 'price stability' during the press conference, suggesting he may not pursue rate cuts as many expected from President Trump's nominee.

Jeffrey Gundlach, CEO of DoubleLine Capital, said: 'He's absolutely telling you he plans to achieve price stability. That means... we won't have the accommodative monetary policy many expected from Chair Warsh when everyone was betting on rate cuts in the first quarter. He didn't sound like that at all today.'