Top News

• The S&P 500 and the Nasdaq 100 fell 1.2% and 1%, respectively, while the Dow Jones lost 1%.
• The Fed held the key interest rate at 3.50%-3.75%, and raised the possibility of one hike at the end of 2026. 
• The Fed hiked its inflation outlook to 3.6% for end-2026, up from 2.7% in March.

U.S. stock indices dropped on Wednesday and Treasury yields spiked as investors assessed the possibility of one rate hike toward the end of this year amid elevated inflationary pressures. 

The S&P 500 lost 1.2%, Nasdaq dropped 1% and the Dow Jones fell 1%. The Russell 2000, which tracks stocks with small market capitalizations, fell 0.7%. 

Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) slipped 1%, and Invesco QQQ Trust (QQQ) ended Wednesday around 0.5% lower, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) ended 1% lower. 

Meanwhile, the VanEck Semiconductor ETF (SMH) jumped 2.3%.

However, retail sentiment on Stocktwits for SPY and QQQ was ‘normal’ and ‘bullish’ for the DIA, with ‘normal’ to ‘high’ message volumes.

US Market Drivers

After the Fed announced its decision, markets reacted to Chairman Kevin Warsh’s insistent focus on maintaining "price stability," leading money markets to factor in a full rate increase by October. Consequently, the S&P 500 declined by 1.2%. During this period, the dollar gained strength, and two-year Treasury yields rose by 16 basis points, reaching a level of 4.21%.

The U.S. Federal Reserve left interest rates unchanged in Kevin Warsh’s first decision as the Fed chair on the back of elevated inflation and a strong job market. The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote.

However, rising oil prices linked to the U.S.-Iran war, pushed the Federal Reserve to hike its inflation target to significantly higher levels.

According to current projections from policymakers, headline PCE inflation is expected to reach 3.6% year-over-year by the end of December, a sharp increase from the 2.7% forecast in March. Meanwhile, core inflation, which strips out volatile energy and food prices, is projected to end the year at 3.3% year-over-year.

Data from the CME FedWatch tool shows that the odds of the Fed raising interest rates by 25 basis points in its September meeting was 49.3% and 45% in the October meeting.

“Today’s meeting confirms that the Fed’s recent hawkish shift was not just about higher energy prices,” said Kay Haigh at Goldman Sachs Asset Management to Bloomberg in an interview. “Despite the recent pullback in oil, half of the members of the FOMC expect rate hikes as soon as this year, reflecting strong labor market and inflation data.” 

Trending Stocks To Watch 

SpaceX (SPCX): After a three-day surge that pushed its market value above Amazon.com Inc., making it the fifth-largest firm globally, the company experienced its first share price decline since going public.

Uber (UBER): The company unveiled two initiatives to scale the robotaxi side of the business and maintain dominance in the ride-hailing sector amid rising competition and the growing popularity of driverless offerings. 

AST SpaceMobile (ASTS): AST SpaceMobile announced that the BlueBird 8, 9, and 10 satellites were launched aboard a SpaceX Falcon 9 rocket from Cape Canaveral on Wednesday. 

Bed Bath And Beyond (BBBY): Agreed to acquire Fathom Holdings Inc. (FTHM), a technology-driven real estate services platform, as the retailer accelerates its plan to build what it calls the nation's first end-to-end homeownership platform. 

Rackspace Technology (RXT): A bullish Wall Street note highlighted the company’s partnership with Advanced Micro Devices (AMD) as a potential catalyst for gaining market share across several key industries. 

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