US stocks sink on worries about a possible hike to interest rates this year by the Federal Reserve
U.S. stock markets fell Wednesday after Federal Reserve projections showed nine of 18 policymakers expect at least one interest rate hike in 2024, with the S&P 500 dropping 1.1% and the Dow declining 0.8%. Chairman Kevin Warsh also proposed ending forward guidance to shift market focus toward economic data rather than Fed expectations.
The U.S. stock market declined Wednesday following the Federal Reserve’s latest projections, which indicated nine of its 18 policymakers anticipate raising interest rates at least once before the end of 2024. The S&P 500 fell 1.1%, the Dow Jones Industrial Average dropped 0.8% after an earlier gain, and the Nasdaq composite sank 1%. The shift reflected concerns that higher rates could slow economic growth while curbing inflation. Federal Reserve Chairman Kevin Warsh suggested overhauling how the central bank communicates with markets, proposing an end to forward guidance—hints about future rate moves—to encourage investors to react directly to economic data like inflation and employment trends. The Fed also kept its benchmark federal funds rate unchanged, as it has all year. In the bond market, Treasury yields rose, with the 10-year yield climbing to 4.48% and the two-year yield jumping to 4.20%, reflecting expectations of tighter monetary policy. Stocks fluctuated sharply after the projections were released, with SpaceX losing 3.3% despite an earlier gain, while La-Z-Boy surged 15.2% after reporting stronger-than-expected quarterly profits. A separate report showed U.S. retailers saw faster revenue growth in May than expected, though high inflation continues to weigh on consumer confidence. Meanwhile, rising global bond yields have raised concerns about broader economic slowdowns and investment declines.
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