US Stocks Slump as Fed Signals Potential Rate Hikes to Curb Inflation

Major US indices witnessed a sharp sell-off on Wednesday as investors recalibrated their expectations following the Federal Reserve's decision to hold interest rates steady. The shift in sentiment was driven by a hawkish stance from policymakers, signaling that higher interest rates might be necessary to tackle persistent inflation.

Fed Holds Rates Steady but Signals Hawkish Shift

While the Federal Reserve maintained interest rates in the 3.50%-3.75% range as widely expected, the accompanying quarterly projections sent shockwaves through the market. The central bank's policy statement notably removed previous language that had hinted at the possibility of rate cuts this year.

In a departure from tradition, new Fed Chair Kevin Warsh did not submit an interest-rate-path projection as part of the quarterly forecasts. Instead, Warsh emphasized a steadfast commitment to price stability, highlighting the urgent need to tame inflation pressures—exacerbated by oil-price spikes linked to the Iran war. The data revealed that nine central bank officials now expect at least one rate hike by the end of 2026.

Market Reaction: Nasdaq and S&P 500 Retreat

The markets responded swiftly to the Fed's "hawkish tilt." According to CME Group's FedWatch tool, trader bets that rates would remain steady by year-end plummeted from 40% on Tuesday to just 15.7% following the announcement. Currently, expectations for a 25-basis-point hike by December stand at nearly 38%, while a 50-basis-point hike carries a 33% probability.

The impact on major indices was significant:

Economic Data and Geopolitical Volatility

The market turbulence was further complicated by mixed economic indicators and geopolitical uncertainty. US retail sales for May showed an unexpected increase, with households continuing to purchase vehicles despite rising gasoline prices.

Selain itu, reli saham baru-baru ini—yang didorong oleh optimisme atas kesepakatan damai awal antara AS dan Iran—terhenti setelah Presiden Donald Trump mengindikasikan bahwa perjanjian tersebut belum final. Ancaman konflik baru menyebabkan harga minyak merangkak naik kembali, menambah kekhawatiran inflasi lebih lanjut dalam radar The Fed.

Dalam berita korporasi, saham CME Group merosot menyusul pengumuman bahwa CEO Terry Duffy akan bertransisi menjadi Executive Chairman pada 1 Maret. Sebaliknya, saham Allbirds melonjak setelah perusahaan melakukan rebranding menjadi Smartbird, beralih ke arah AI dan menunjuk mantan eksekutif Amazon, Nadia Carlsten, sebagai CEO.

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