US Markets Slump: Nasdaq and S&P 500 Drop as Fed Signals Hawkish Pivot

Wall Street faced a significant downturn on Wednesday as the Federal Reserve maintained current interest rates while signaling a potential shift toward tighter monetary policy. Investors reacted sharply to hawkish commentary from Fed Chair Kevin Warsh, leading to a broad sell-off across major indices.

Fed Holds Rates but Shifts Stance Toward Inflation Control

While the Federal Reserve left interest rates unchanged in the 3.50%-3.75% range—a move widely anticipated by markets—the underlying sentiment was decidedly "hawkish." The central bank's quarterly projections revealed that nine officials now expect at least one rate hike by the end of 2026.

Crucially, the Fed’s latest policy statement removed previous language that had hinted at the possibility of interest rate cuts within this year. New Fed Chair Kevin Warsh broke with tradition by not submitting an interest-rate-path projection, instead emphasizing a singular, rigid commitment to achieving price stability and taming inflation. This shift comes as policymakers grapple with inflationary pressures stemming from a spike in oil prices linked to the Iran war.

Trader Bets Shift Toward Interest Rate Hikes

The market's reaction was swift, as traders recalibrated their expectations for the remainder of the year. According to CME Group’s FedWatch tool, the probability of rates remaining steady through year-end plummeted from 40% on Tuesday to just 15.7% following the announcement.

The outlook for December has turned increasingly aggressive; expectations for a 25-basis-point rate hike now stand at nearly 38%, while the probability of a more substantial 50-basis-point hike has reached approximately 33%. Michael James, Managing Director at Rosenblatt Securities, noted that the primary takeaway for the markets was the Fed's intense focus on its commitment to price stability.

Major Indices and Corporate Highlights

The shift in sentiment triggered a decline across all major US benchmarks. The S&P 500 dropped 89.59 points (1.19%) to close at 7,421.76, while the Nasdaq Composite saw a steeper decline of 349.14 points (1.32%) to end at 26,027.21. The Dow Jones Industrial Average also faced pressure, falling 499.18 points (0.96%) to finish at 51,494.99.

Dans l'actualité des entreprises, les actions de CME Group ont reculé suite à l'annonce que le PDG Terry Duffy quittera ses fonctions le 1er mars pour devenir président exécutif. À l'inverse, les actions d'Allbirds ont bondi après que l'entreprise s'est tournée vers l'IA, se repositionnant sous le nom de Smartbird et nommant l'ancienne cadre d'Amazon, Nadia Carlsten, comme nouvelle PDG.

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