Dow drops 500 points as Kevin Warsh’s first Fed meeting triggers spike in bond yields

Stocks declined on Wednesday while Treasury yields climbed sharply, as investors turned cautious after several Federal Reserve officials signaled the possibility of a rate hike later this year to control inflation.

The Dow Jones Industrial Average dropped 507.12 points, or 0.98%, closing at 51,492.55 after reaching another intraday record high earlier in the session — its third straight record. The S&P 500 fell 1.21% to close at 7,420.10, while the Nasdaq Composite lost 1.34%, ending at 26,021.66.

Big tech stocks weighed heavily on the market, with Microsoft, Meta Platforms, Alphabet, and Amazon all finishing lower. Newly listed SpaceX also pressured sentiment, posting its first decline since its IPO on Friday. Meanwhile, gains in chipmakers like Intel and Micron Technology helped limit broader losses.

Following the conclusion of the Federal Reserve’s two-day policy meeting — the first under Chairman Kevin Warsh — the central bank kept interest rates unchanged at 3.5% to 3.75%.

However, updated economic projections showed several Fed officials now expect rates to rise in 2026. The median year-end fed funds rate estimate increased to 3.8%, up from 3.4% in March, indicating at least one rate hike may be needed next year.

Adding to market uncertainty, Kevin Warsh chose not to submit his own rate projection.

Treasury yields surged after the announcement, with the 2-year yield jumping more than 16 basis points to 4.216%.

Investors also closely watched Warsh’s remarks during the press conference, where he repeatedly emphasized the Fed’s commitment to “price stability,” signaling a more cautious stance on rate cuts than many had anticipated.