Summary · why it matters
U.S. stocks fell sharply on Wednesday after the Federal Reserve signaled the possibility of higher interest rates later this year. The S&P 500 closed down 1.21%, the Dow Jones Industrial Average fell 0.98% from a new all-time high, and the Nasdaq 100 dropped 0.99%. The FOMC kept rates unchanged at 3.50% to 3.75% but its dot-plot projections showed a median fed funds rate of 3.750% by end-2026, up from a prior 3.375%, implying at least one more quarter-point hike. Nine of 18 participants penciled in at least one more increase, with six expecting at least two. The Fed also raised its 2026 core PCE inflation forecast to 3.3% from 2.7% and cut its GDP growth estimate to 2.2% from 2.4%. Losses in the Magnificent Seven tech stocks and a slump in software shares weighed on the market, while stronger-than-expected retail sales and pending home sales data initially provided support.