US stocks fell on Wednesday after the Federal Reserve raised interest rates for the first time in three years and flagged persistent inflation risks.
The Dow Jones Industrial Average dropped 631.21 points, or 1.21%, to 51,461.90. The S&P 500 fell 0.45% to 7,551.81, while the Nasdaq Composite was almost flat, slipping 0.01% to 25,978.42.
The Fed unanimously raised its benchmark rate by 25 basis points to a range of 3.75%-4%, its first increase since July 2023, and signalled another hike could come later this year.
Markets initially took the widely expected decision in stride before turning lower during Fed chairman Kevin Warsh’s press conference. Warsh stressed that inflation remained too high, while the Fed’s projections showed inflation staying above target through much of 2029.
The US 10-year Treasury yield moved back above 5%, adding pressure to rate-sensitive parts of the market. Financial stocks were among the weakest, with Bank of America and Wells Fargo falling nearly 3%, while Goldman Sachs and American Express lost almost 4%.
Oil prices remained above US$100 a barrel amid supply constraints linked to the Iran and Ukraine wars.
Australian Market Outlook
Australian shares are set for a sharp fall, with S&P/ASX 200 futures down 63 points, or 0.7%, to 8,681.
The weaker outlook follows the Fed’s rate increase and signals that further tightening may be required to bring inflation back towards target.
Higher global bond yields are also likely to remain a headwind for equities, with investors now assessing how long rates may remain elevated and whether the Fed follows through with another increase later this year.
