NEW YORK (AP) 鈥� U.S. stocks slumped Wednesday on speculation may hike interest rates this year to keep a lid on inflation. Higher rates can tap the brakes on , but they also slow the economy and hurt prices for investments.
The S&P 500 dropped 1.2% and erased an earlier, modest gain after the Fed released projections showing that nine of 18 policymakers foresee at least one increase to its main interest rate this year. The Dow Jones Industrial Average went from a gain of 280 points in the morning to a drop of 507 points, or 1%, while the Nasdaq composite sank 1.3%.
One important policymaker at the Fed did not give a forecast for where the federal funds rate may end 2026: Chairman . In his first press conference as head of the U.S. central bank, Warsh said he鈥檚 also considering a revamp of how the Fed communicates with financial markets and U.S. households and businesses.
One of his first moves was to end the inclusion of hints in Fed statements about where interest rates may be heading in the future, something called 鈥渇orward guidance.鈥�
Warsh said he wants Wall Street to react to incoming reports about inflation, and other economic data based on how they should affect prices for stocks, bonds and other investments rather than how traders expect the Federal Reserve to react to them.
As part of that, Warsh said the Fed could make changes to its usual release of projections every three months showing where Fed officials foresee interest rates, the economy and inflation heading.
For now, Wall Street reacted uneasily to Fed officials鈥� latest set of projections, though Warsh cautioned he 鈥渄idn鈥檛 hear tons of conviction鈥� behind them. Stocks zigzagged up and down several times following the release. The Fed also announced its decision to keep the federal funds rate steady at this meeting, as it has all year so far.
In the bond market, Treasury yields climbed. The yield on the 10-year Treasury, which influences rates for and other loans going to U.S. households and businesses, rose to 4.49% from 4.43% late Tuesday. The two-year Treasury yield, which more closely tracks expectations for Fed action, jumped to 4.21% from 4.05%.
Traders upped their bets for at least one increase to the federal funds rate this year and now see an 84% probability of it, up from 59.5% a day earlier, according to data from CME Group.
caused by worries about inflation have already been threatening to slow economies and undercut prices for all kinds of investments.
In the stock market, SpaceX erased an early gain and fell 4.9% for its first loss since last week.
Drops of 3.8% for Microsoft, 3.5% for Amazon and 1.3% for Nvidia were three of the heaviest weights on the S&P 500.
They helped overshadow a jump of 14.8% for La-Z-Boy, which reported stronger profit and revenue for the latest quarter than analysts expected. It benefited from revenue made at newly opened stores, though Chief Financial Officer Taylor Luebke said the company continues to have 鈥渁 measured view鈥� of the broad sales environment.
All told, the S&P 500 fell 91.25 points to 7,420.10. The Dow Jones Industrial Average dropped 507.12 to 51,492.55, and the Nasdaq composite sank 354.69 to 26,021.66.
A report released Wednesday said at a faster pace in May than economists expected, offering hope that solid spending by consumers can support the economy. But high inflation has also made U.S. shoppers feel more discouraged about their finances.
Oil prices were steadier Wednesday following slides earlier in the week on optimism about the tentative U.S.-Iran deal to get the global flow of oil going again. to reopen the Strait of Hormuz once the deal is signed, which would allow oil tankers to deliver crude from the Persian Gulf again and hopefully take pressure off inflation.
The price for a barrel of Brent crude oil rose 0.7% to $79.55. It鈥檚 still above its roughly $70 price from before the war, but it鈥檚 well below its $100-plus price from a few weeks ago.
In stock markets abroad, indexes were mixed across Europe and Asia.
South Korea鈥檚 Kospi jumped 1.6%, and Hong Kong鈥檚 Hang Seng fell 0.7% for two of the world鈥檚 bigger moves.
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AP Business Writers Chan Ho-him, Matt Ott and Elaine Kurtenbach contributed to this report.
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