US Stocks Close Lower, Dow Falls Nearly 500 Points, Warsh's First Fed Meeting Triggers Yield Surge

June 18 Beijing time, US stocks closed lower on Wednesday, with the Dow falling about 500 points. Megacap tech stocks led declines, and Treasury yields surged. Several Fed officials hinted at possible rate hikes 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 high earlier in the session, marking the third consecutive session of record highs. The Nasdaq dropped 354.68 points, or 1.34%, to 26,021.65. The S&P 500 declined 91.25 points, or 1.21%, to 7,420.

Major tech megacaps led declines, with Microsoft, Meta Platforms, Alphabet, and Amazon all falling. The hot IPO stock SpaceX also dampened sentiment, declining for the first time since its debut last Friday. Gains in chip stocks like Intel and Micron Technology helped limit some of the broader decline.

This was the first Federal Reserve meeting chaired by new Chair Kevin Warsh. After the two-day meeting, the Fed held interest rates steady at the target range of 3.5% to 3.75%.

According to the Summary of Economic Projections, several Fed officials expect rate hikes in 2026. The median year-end federal funds rate estimate is now 3.8%, up from 3.4% in the previous March forecast, suggesting the committee sees at least one rate hike needed in 2026.

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

Following the decision, US Treasury yields jumped, with the 2-year yield rising 16 basis points to 4.208%.

"The market reaction is primarily about the dot plot... it 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 during the press conference on the Fed's commitment to "price stability," suggesting he may not pursue rate cuts as many expected from President Trump's nominee.

Jeffrey Gundlach, CEO of DoubleLine Capital, said: "He is absolutely telling you he plans to deliver price stability. That means ... we are not going to have the kind of easy monetary policy that some might have expected from Chair Warsh, as everyone was betting on rate cuts early this year. He sounded nothing like that today."