US Markets Slump as Fed Signals Hawkish Shift and Potential Rate Hikes

Major US indices faced a sharp sell-off on Wednesday as the Federal Reserve's decision to hold interest rates steady was overshadowed by a hawkish outlook on inflation. Traders quickly adjusted their expectations, pricing in a higher probability of interest rate hikes later this year following commentary from Fed Chair Kevin Warsh.

Fed Holds Rates Steady Amid Inflationary Pressures

The Federal Reserve maintained interest rates within the 3.50%–3.75% range, a move that was widely anticipated by market participants. However, the decision was complicated by persistent inflation pressures, particularly driven by an oil-price spike resulting from tensions during the Iran war.

In a notable shift in communication, the Fed's policy statement removed previous language that had signaled the possibility of rate cuts within the current year. Breaking from traditional practice, new Fed Chair Kevin Warsh did not provide a specific interest-rate-path projection. Instead, he emphasized a rigorous commitment to price stability, signaling that the central bank remains focused on taming inflation.

Traders Pivot Toward Rate Hike Expectations

The market reaction was swift and decisive. According to the CME Group's FedWatch tool, trader bets that rates would remain steady by the end of the year plummeted from 40% on Tuesday to just 15.7%. The consensus among investors has shifted toward a tightening cycle.

Current market projections indicate a significant appetite for rate increases:

• The probability of a 25-basis-point rate hike by December stands at nearly 38%.
• The likelihood of a more aggressive 50-basis-point hike is approximately 33%.
• Quarterly projections reveal that nine central bank officials expect at least one rate hike before the end of 2026.

Major Indices and Individual Stock Performance

The hawkish tilt from the Fed led to a broad-based decline across Wall Street. The S&P 500 fell by 89.59 points, or 1.19%, to close at 7,421.76. The tech-heavy Nasdaq Composite saw a steeper decline, dropping 349.14 points, or 1.32%, to finish at 26,027.21. Meanwhile, the Dow Jones Industrial Average shed 499.18 points, a 0.96% loss, ending at 51,494.99.

Dalam pergerakan saham individu, saham CME Group menghadapi tekanan susulan pengumuman bahawa CEO Terry Duffy akan meletak jawatan pada 1 Mac untuk beralih ke peranan pengerusi eksekutif. Sebaliknya, Allbirds menyaksikan lonjakan dalam harga saham selepas syarikat itu menjenamakan semula sebagai "Smartbird," beralih daripada alas kaki kepada AI, dan melantik bekas eksekutif Amazon, Nadia Carlsten, sebagai CEO baharunya.

Ketidaktentuan Didorong oleh Ketidakpastian Geopolitik

Ketidaktentuan pasaran semakin diburukkan lagi oleh peralihan pendirian geopolitik. Walaupun saham sebelum ini melonjak atas harapan terhadap perjanjian damai AS-Iran, penjelasan terbaharu Presiden Donald Trump—yang menyatakan bahawa perjanjian tersebut belum muktamad dan peperangan boleh bersambung semula—menyebabkan harga minyak meningkat semula, sekali gus menambah kebimbangan terhadap inflasi.

Ringkasan Utama

• Prospek Fed yang Hawkish: Walaupun kadar kekal pada 3.50%-3.75%, pembuangan istilah "pemotongan kadar" dan unjuran baharu menunjukkan tumpuan terhadap potensi kenaikan kadar.
• Penentuan Semula Harga Pasaran: Jangkaan pedagang untuk kadar yang stabil merosot daripada 40% kepada 15.7%, dengan hampir 38% kini bertaruh pada kenaikan 25-bps menjelang Disember.
• Penurunan Pasaran Secara Menyeluruh: S&P 500 dan Nasdaq kedua-duanya jatuh lebih daripada 1% apabila pelabur bertindak balas terhadap risiko inflasi dan ketidakstabilan geopolitik.