US close: Stocks drop after hawkish Fed outlook, bond yields jump

(Sharecast News) - US stocks fell sharply and bond yields jumped on Wednesday as investors digested a hawkish outlook from the Federal Reserve, despite the central bank holding interest rates unchanged as expected.

The Dow, which hit a record closing high of 51,999.67 on Tuesday, fell 0.98%, while the S&P 500 and Nasdaq dropped 1.2% and 1.3%, respectively.

While markets awaited further details of the US-Iran peace deal agreed at the weekend, all eyes were firmly on the Fed, as Kevin Warsh held his first press conference the central bank's new chair.

While keeping the federal funds rate unchanged, as was widely predicted, interest-rate forecasts were revised upwards for the next three years, with the dot plot graph showing that nine of the Fed's 18 policymakers expecting at least one rate hike before the end of 2026 - though Warsh abstained from submitting a projection. Back in March, at the onset of the energy crisis caused by the Iran war, no Fed participants expected a hike.

In the press conference following the decision, Warsh said policymakers were still "unambiguously and unanimously" committed to bringing inflation back to the Fed's 2% target.

However, he added that "the Committee will deliver price stability", which markets took to mean the Fed is prepared to hike rates if necessary.

"The Fed did not hike, but Warsh made hikes believable again. That was enough to force the front end, the dollar and risk assets to reprice," said market commentator Stephen Innes. "This was a hawkish hold, not a policy move. The message was that the bar for a hike is lower, while the bar for a cut has moved higher."

The yield on a two-year US Treasury note climbed 12.7 basis points to 4.195%, its highest since February 2025, while 10-year bond yields rose 5.5bp to 4.500%.

Elsewhere on the macro front, US mortgage applications fell for a fourth time in five weeks in the week ended 12 June, according to the Mortgage Bankers Association, with overall volumes down 3.8% despite benchmark mortgage rates holding steady.

US retail sales rose 0.9% in May, according to advance estimates from the Census Bureau, hitting $763.7bn. On an annualised basis, retail sales registered a 6.9% increase.

Lastly, US pending home sales jumped 3.8% in May, following a 0.3% increase in April, coming in well ahead of the 0.8% consensus forecast.

In the corporate space, SpaceX erased early gains to finish down 5%, its first daily decline after debuting on the Nasdaq last Friday to much fanfare. The stock is still up 42% from last week's $135 IPO price.

Banking stocks also gave up early gains. JPMorgan, Goldman Sachs and Morgan Stanley all finished higher but well off their earlier highs, which saw all three hit new intraday records.

Dow Jones - Risers

Caterpillar Inc. (CAT) $955.92 1.11%

Goldman Sachs Group Inc. (GS) $1,099.14 0.78%

JP Morgan Chase & Co. (JPM) $333.46 0.70%

Merck & Co. Inc. (MRK) $115.44 0.23%

Apple Inc. (AAPL) $295.95 0.19%

Dow Jones - Fallers

Salesforce.Com Inc. (CRM) $155.02 -4.14%

Microsoft Corp. (MSFT) $378.91 -3.96%

Intel Corp. (INTC) $121.10 -3.87%

International Business Machines Corporation (CDI) (IBM) $262.35 -3.12%

Amgen Inc. (AMGN) $341.66 -2.89%

Home Depot Inc. (HD) $327.48 -2.85%

Cisco Systems Inc. (CSCO) $117.33 -2.40%

Unitedhealth Group Inc. (UNH) $399.53 -1.99%

Verizon Communications Inc. (VZ) $45.84 -1.90%

Nike Inc. (NKE) $44.19 -1.89%

S&P 500 - Risers

Take-Two Interactive Software Inc. (TTWO) $228.03 5.62%

Mosaic Company (MOS) $22.51 3.78%

FMC Corp. (FMC) $11.98 3.28%

RTX Corporation (RTX) $192.58 3.11%

Western Digital Corp. (WDC) $712.13 2.64%

Cummins Inc. (CMI) $717.78 2.54%

Fluor Corp. (FLR) $51.92 2.51%

Equinix, Inc. (EQIX) $1,088.52 2.27%

Morgan Stanley (MS) $224.96 1.87%

News Corp Class B (NWS) $29.60 1.86%

S&P 500 - Fallers

Carmax Inc. (KMX) $47.43 -8.98%

Nasdaq Inc (NDAQ) $83.29 -8.88%

Coterra Energy Inc. (CTRA) $32.56 -8.62%

Coty Inc. Class A (COTY) $1.90 -8.21%

Skyworks Solutions Inc. (SWKS) $69.38 -8.14%

Charter Communications Inc. (CHTR) $132.00 -7.85%

Equifax Inc. (EFX) $154.84 -7.35%

Dollar Tree Inc (DLTR) $106.41 -7.02%

PVH Corp. (PVH) $76.42 -6.43%

Akamai Technologies Inc. (AKAM) $127.86 -6.09%

Nasdaq 100 - Risers

Take-Two Interactive Software Inc. (TTWO) $228.03 5.62%

Western Digital Corp. (WDC) $712.13 2.64%

Sirius XM Holdings Inc (SIRI) $27.93 2.01%

Synopsys Inc. (SNPS) $461.74 1.81%

Vertex Pharmaceuticals Inc. (VRTX) $458.99 1.36%

Seagate Technology Plc (STX) $1,066.07 0.74%

Applied Materials Inc. (AMAT) $592.92 0.59%

Marriott International - Class A (MAR) $394.61 0.52%

Broadcom Inc. (AVGO) $392.90 0.50%

Expedia Group Inc. (EXPE) $239.47 0.50%

Nasdaq 100 - Fallers

Qvc Group Inc Series A (QVCGA) $0.34 -13.49%

Skyworks Solutions Inc. (SWKS) $69.38 -8.14%

Charter Communications Inc. (CHTR) $132.00 -7.85%

Dollar Tree Inc (DLTR) $106.41 -7.02%

Liberty Global plc Series C (LBTYK) $10.91 -5.95%

Adobe Systems Inc. (ADBE) $196.28 -5.86%

QUALCOMM Inc. (QCOM) $212.97 -5.82%

Netflix Inc. (NFLX) $76.96 -5.73%

Microchip Technology Inc. (MCHP) $94.11 -5.65%

Comcast Corp. (CMCSA) $22.69 -5.54%