US close: Stocks lower as Fed delivers first rate hike in three years, Warsh flags stubborn inflation

(Sharecast News) - Wall Street stocks closed lower on Wednesday after the Federal Reserve announced its first interest rate hike in three years.

At the close, the Dow Jones Industrial Average was down 1.21% at 52,462.55, while the S&P 500 shed 0.45% to 7,551.81 and the Nasdaq Composite saw out the session 0.01% softer at 25,978.42.

The Dow closed 631.21 points lower on Wednesday, extending losses recorded in the previous session.

Stocks traded slightly higher early on Wednesday as markets began to price in a quarterpoint hike, but headed south during chair Kevin Warsh's press conference as he stressed that inflation risks had not improved. Warsh warned that price pressures remained stubborn, saying: "The plain fact is that inflation is too high, and has been for too long [... ]This summer's inflation readings do not tell me that underlying trends have meaningfully improved.'

Energy markets also remained in focus, with US diesel hitting $6 a gallon for the first time amid supply strains linked to the Ukraine and Iran conflicts. Crude traded lower but held above $100 a barrel, while the benchmark 10year note Treasury note was at 4.976% and the 30year note at 5.355%.

Elsewhere on the macro front, US mortgage applications fell 4.1% in the second week of September, according to the Mortgage Bankers Association, extending the 2.7% decline seen previously and marking the sharpest drop in seven weeks. The fall came as the 30year fixed mortgage rate jumped to a 16month high of 6.97%. Applications to refinance a mortgage slid 9%, while applications to purchase a home edged 1% lower, reflecting softer demand against a backdrop of rising borrowing costs and uncertainty over future property disposals.

Elsewhere, import and export prices both rose in August, with the latest Bureau of Labor Statistics data showing broadbased strength across goods. Import prices increased 0.7% on the month, driven by a 0.8% rise in nonfuel imports, while fuel prices dipped 0.1% as lower naturalgas costs offset a small uptick in petroleum. Import prices were 7% higher yearonyear, the fastest annual increase since August 2022, with gains led by industrial supplies, capital goods and consumer goods.

Export prices rose 0.6%, rebounding after declines in June and July, with agricultural export prices up 0.5%, supported by higher corn and animalfeed prices, while nonagricultural export prices climbed 0.7% on stronger industrial supplies, capital goods and automotive products. Export prices were 8.6% higher than a year earlier, with both agricultural and nonagricultural categories contributing to the rise.

On another note, retail sales rose more strongly than expected in August, rebounding after July's first decline in nine months and underscoring resilient consumer demand despite mounting concerns over inflation. The Census Bureau reported on Wednesday that sales jumped 1.2% last month, following a revised 0.5% drop in July, driven by stronger motorvehicle purchases and backtoschool spending. Economists had pencilled in a 0.8% increase.

Still on data, business sales edged higher in July, while inventories continued to build, according to Census Bureau data. The combined value of manufacturers' shipments and distributivetrade sales rose 0.3% to $2.12trn, leaving sales 8.9% above yearearlier levels. Inventories increased 0.8% on the month to $2.76trn, up 3.8% from July 2025. The business inventoriestosales ratio eased to 1.30, down from 1.37 a year earlier, indicating leaner stock levels relative to sales.

Finally, homebuilder confidence weakened in September, with the NAHB/Wells Fargo housing market index slipping to 32, its lowest reading in a year, down from 35 in August and below expectations for 34. Current sales conditions fell four points to 35, while sales expectations for the next six months dropped six points to 37. The survey also showed 38% of builders cut prices during the month, up from 35% in August, reflecting softer demand and ongoing affordability pressures.

In the corporate space, Lennar reported third quarter earnings of $1.19 per share after the close, missing analysts' estimates of $1.29, while revenues of $8.05bn also fell short of consensus estimates of $8.31bn.

Reporting by Iain Gilbert at Sharecast.com