Stock market today: Dow, S&P 500, Nasdaq slide after Fed decision points to coming rate hike

US stocks moved solidly into the red on Wednesday as the Federal Reserve decided to hold interest rates steady in the central bank's first decision under new Chairman Kevin Warsh, but pointed to the possibility of rate hikes later this year. The tech-heavy Nasdaq Composite (^IXIC) and S&P 500 (^GSPC) both slid by over 1%, while the Dow Jones Industrial Average (^DJI) gave up nearly 1%, or around 500 points. The moves came a day after the Dow closed at a record high amid uncertainty around the US-Iran peace deal. Pushing US equities to the downside was news that nine out of 18 FOMC members who submitted economic projections — with Warsh as the sole member sitting out — see a rate hike coming by the end of the year. The projections pushed traders to fully price in one quarter-point hike by year-end, per Bloomberg data. Policymakers had projected one 2026 rate cut in March, but the job market has firmed, and inflation has risen to the highest level in three years, pushed up by higher energy prices from the conflict in the Middle East. Investors are also debating whether the blocked oil flows through the Strait of Hormuz could be cleared quickly, as they weigh the US-Iran interim deal to end their conflict. After agreeing on a draft 14-point memorandum, the two sides aim to formally sign an agreement on Friday. But President Trump said the memo wasn't final and the US could "go right back to dropping bombs right smack in the middle of their head" if he didn't like it, speaking at the G7 summit on Wednesday. Meanwhile, SpaceX (SPCX) turned over 3% lower, poised to snap a post-IPO rally that has seen the Elon Musk-led rocket company eclipse Amazon (AMZN) in market value in just three days of trading. LIVE 16 updates Warsh says markets 'perform best when they react to incoming data,' rather than asking what the Fed will do Kevin Warsh said financial markets “perform best when they react to incoming data” instead of trying to predict the Federal Reserve’s next move — another signal of what he sees as the Federal Reserve’s proper role in the US economy. “I think the financial markets work less efficiently when they ask a question, 'How will the Federal Reserve react to that incoming information?’” He added further, about the Fed’s effect, or lack thereof, on prices: “We cannot have a very significant effect on particular prices … but we do have a really important job there. It’s to make sure that those changes in oil or beef or eggs or milk don't broaden in the economy, don't have second and third order effects. That's our job.” Stocks waver as traders price in rate hike by year-end The three major indexes wavered after the Federal Reserve voted to maintain interest rates at a target rate of 3.5% to 3.75%, with nine of 18 FOMC members who submitted forward-looking projections signaling a rate hike to come. The S&P 500 (^GSPC) lost roughly 0.2%, while the Dow Jones Industrial Average (^DJI) and Nasdaq Composite (^IXIC) both moved less than 0.1% around the flatline. All three major US equity indexes notched steeper losses in the minutes after the decision. Traders fully price in rate hike by end of year Traders are fully pricing in a rate hike by the Federal Reserve’s December meeting, per Bloomberg data. Bets on a rate hike had backed off following President Trump’s announcement of an agreement with Iran on Sunday, but the hawkish tilt to the Federal Reserve’s economic projections — nine out of 18 FOMC members signaling a hike to come this year — has reignited bets of one quarter-point hike to come in 2026. Odds have crossed past 50% of a rate hike to come by the Fed’s October meeting, with the vast majority of traders seeing a quarter-point hike by December, per data from the CME Group. Federal Reserve holds rates steady at 3.5% to 3.75% in uanimous vote The Federal Reserve voted to hold the US target interest rate steady at a range of 3.5% to 3.75%, in line with market bets leading up to the decision, in a unanimous vote. Nine of 18 members of the Federal Open Markets Committee projected that they see a rate hike this year. "Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East," per the Federal Reserve's statement on the decision. "Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little." Data center developers could soon get key guidance on speeding up connections to US power grid Hyperscalers could soon get long-awaited clarity on how to accelerate their access to the US power grid, with the Federal Energy Regulatory Commission (FERC) expected to soon offer major guidance to the data center industry. Hyperscalers and other data center developers currently face grid connection queues that can stretch to years, forcing pivots to so-called “behind the meter” power solutions such as on-site natural gas generation or restarting shuttered nuclear plants. And yet, major developers of natural gas turbines such as GE Vernova cite yearslong order backlogs, and plans to restart nuclear centers such as Three Mile Island have drawn intense criticism. Any guidance from FERC that could speed up connections to the US power grid would be a major boon for data center developers When FERC meets on Thursday, the key item on their agenda will be discussion of rulemaking for “Interconnection of Large Loads to the Interstate Transmission System.” “It could potentially be the most significant FERC action in decades,” former chairman Neil Chatterjee told Bloomberg in an interview. If the FERC “were to obligate the hyperscalers with the cost of paying for system upgrades while simultaneously agreeing to a curtailment obligation, it would just be transformative. It’s very, very exciting, but not without controversy.” SpaceX stock slips for first time, poised to end 3-day streak SpaceX (SPCX) stock fell on Wednesday for the first time since the company went public, breaking a three-session winning streak that pushed Elon Musk’s company into the top 10 most valuable companies. Yahoo Finance’s Pras Subramanian reports: The stock shed as much as 5% in the opening hour, trimming a debut rally that had at one point reached roughly 58% above the IPO price. The slide arrived just a day after SpaceX edged past Amazon to become the fifth-most-valuable stock, having briefly climbed above Microsoft during Tuesday's trading. The reversal is an early gauge of whether the retail frenzy behind the launch can hold up a valuation that rose almost without interruption. Individual investors had bought more SpaceX stock than any other name on every trading day since the offering, per Vanda Research, a pace of demand that has had few precedents among recent market debuts. Read more here. Allbirds stock pops after it changes name to Smartbird, appoints AWS CEO Nadia Carlsten Allbirds (BIRD) stock is up more than 30% on Wednesday as it makes its next move in the dramatic pivot from a sustainable sneaker business to an artificial intelligence company. The company announced a name change to Smartbird and tapped former Amazon Web Services executive Nadia Carlsten as CEO, who also joined the company's board of directors. Carlsten previously served as the Head of Product for AWS Center for Quantum Computing and as CEO of another infrastructure company, DCAI, and Google spin-off SandboxAQ. The company is seeking to fill what it views as a gap in the AI market by providing high-performance AI chips and data center space. Carlsten said the company is "entering the market at a pivotal moment in the evolution of AI infrastructure." She added that there is a "clear opportunity to meet the growing need for enterprise-grade AI infrastructure that delivers control and performance without the capital and operational burden of hardware ownership." IEA: The oil market will flip back into surplus in 2027 The International Energy Agency is predicting an oil glut coming to market in 2027, as the war in Iran looks to wind down and global demand falls. "Our first look at 2027 balances shows a significant overhang emerging next year," the IEA wrote in its most recent monthly market report on Wednesday. "This may provide a welcome respite to the market and an opportunity to replenish depleted inventories, or to build new strategic reserves, as countries review their energy strategies and policies in response to the crisis." At the top line, the IEA is modeling growth in oil demand of 2 million barrels per day (mbd), bringing total demand up to 105.3 mbd, while supply is "set to surge" by roughly 8 mbd to a total 110 mbd. On the supply side, the IEA argues that if the deal between the US and Iran can hold firm, oil production throughout the Gulf region will begin to recover, while other regions such as the Americas continue to boost their own production. For the IEA, however, the focus is on demand. The agency predicts that global demand will fall by 1.1 mbd year-on-year in 2026, a downgrade of 700,000 bpd from the IEA's May report. The agency cites a 5 mbd drop in deliveries "in the face of higher fuel prices and disruptions to product availability." Added up, the IEA's 2027 forecast implies that supply will outweigh demand by 5.05 mbd next year as demand is outpaced. Retail sales rise at a faster rate than expected amid higher gas prices US retail sales rose by more than expected in May as Americans continue to pay more for gasoline than they did four months ago. Retail sales rose 0.9% from April, a bigger jump than the 0.5% economists expected, the Commerce Department reported. On an annual basis, retail sales rose 6.9% from May of last year. Retail sales are not adjusted for inflation, and the rise likely reflects higher costs of goods, such as fuel. Sales at gas stations climbed 3.4% month over month and surged 26.5% year over year. Retail sales at grocery stores and other retailers held steady, suggesting that the war in Iran hasn’t completely shifted the consumer landscape, despite an uptick in inflation. Stocks open modestly higher as investors await Fed Stocks were little changed at the open as investors awaited the first Fed decision and press conference under the new Fed Chairman Kevin Warsh. The tech-heavy Nasdaq Composite (^IXIC) opened 0.5% higher, while the S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) barely budged. Tech, financials, and industrials led the sectors at the open. The 10-year Treasury yield (^TNX) was also steady at 4.43% as traders widely expect the Fed to hold interest rates steady. Goldman Sachs: The market is entering a capex supercycle The market is entering a capex boom so large it's taking hold as a supercycle, Goldman Sachs told investors this week. "For the first time in many decades, the demand for capital is rising," Goldman strategists led by Peter Oppenheimer wrote in a client note. Front and center of the capex supercycle is the hundreds of billions of dollars being poured into the AI infrastructure build-out. The so-called hyperscalers are now projecting more than $600 billion in 2026 capex, driven primarily by AI spending. At the same time, Goldman argues, world governments are spending more on defense and supply chain resilience as the post-war globalization movement has begun to reverse, from the Trump administration's tariff policies to Beijing's stranglehold over critical minerals production. The war in Iran and renewed focus on energy security have only further spurred public investment. "Supply chains are being reconfigured for resilience, raising capital intensity and structurally increasing cost bases, as the cycle shifts from capital-light growth to capital-intensive expansion," per Goldman's strategists. All of this comes as the world steps increasingly toward a "post-modern" era that began in 2022, Goldman argues. The new era, the strategists write, is built on reflation, higher interest rates, heightened debt and cost of capital, growth opportunity, and a host of other factors that say the fiscal conditions of the 2000s are gone. Trump says MOU isn't final: 'If I don't like it, we'll go back to shooting' Stock futures held steady after President Trump underscored on Wednesday that the memorandum of understanding between the US and Iran was not final. "It's ⁠a memorandum of understanding,” Trump said at the G7 summit in France, per Reuters. “And ​if I don't like it, ​we'll go back to shooting at them, dropping bombs on their head." The MOU is scheduled to be signed on June 19, instituting a 60-day negotiation period to end the war. Oil prices edged higher, but still remain below their mid-war peaks. Brent crude futures (BZ=F) were trading at around $79 per barrel, while WTI crude futures (CL=F) traded at $75 per barrel. SpaceX heads toward 4th day of gains since record IPO SpaceX (SPCX) shares rose before the bell, set for a fourth day of gains after the Elon Musk-led rocket company overtook Amazon (AMZN) by market value. Bloomberg reports: Shares of Elon Musk's rocket and AI company Space Exploration Technologies Corp. rose 4.5% in New York premarket trading Wednesday, signaling a slower pace of gains than previous sessions. The company formally known as Space Exploration Technologies Corp. has rallied about 49% since going public through Tuesday's close, overtaking Amazon in value to become the fifth-largest stock in the world, and is now roughly $150 billion away from Microsoft Corp. (MSFT). … SpaceX stock's run is "really not at all unexpected, especially with the fact that they had 30% of the issue available for retail investors," said Brian Mulberry, chief market strategist at Zacks Investment Management. Read more here. All eyes on Warsh as Fed expected to hold rates steady The Federal Reserve’s Kevin Warsh era begins Wednesday, as President Trump’s pick to lead the central bank oversees his first policy decision and holds his first news conference. Yahoo Finance’s Jennifer Schonberger looks at what’s in play: Kevin Warsh will preside over his first interest rate-setting meeting as Federal Reserve chairman on Wednesday, when the central bank is expected to hold rates steady. All eyes will be on Warsh as Fed watchers try to discern his views, his personal credibility, and how he will position the Fed in the current landscape. The committee is facing hotter inflation readings as the conflict in Iran has pushed inflation higher. "While Warsh is generally perceived as dovish, he will inherit a committee that has become noticeably more hawkish," said Greg Daco, chief economist at EY-Parthenon. "Warsh's first challenge will not be steering the committee toward easier policy, but demonstrating that his decisions are grounded in economic fundamentals rather than political considerations." Read more here. Oil holds below $80 following release of draft memo for US-Iran peace Bloomberg reports: Oil headed for the longest losing run in 10 months on gathering expectations that a US-Iran deal to reopen the Strait of Hormuz will unleash a wave of supply, loosening the global crude market. Global benchmark Brent (BZ=F) retreated for a fifth day to below $79 a barrel, trading near a three-month low, while West Texas Intermediate (CL=F) was near $76. The interim pact, which is due to be signed on Friday, offers Tehran broad financial incentives, including the right to sell its oil immediately. Crude prices have retreated sharply in recent weeks as moves to end the war between Washington and Tehran are seen easing tightness in global energy markets. Producers, shippers and traders are now assessing whether the agreement will prove to be durable, and how long it will take for vessel transits of the Hormuz chokepoint to be revived in earnest. While technical details are still being finalized and some language may be changed, a 14-point draft memorandum offers the clearest picture yet of the deal, which will pave the way for 60 days of talks aimed at formally ending the war and imposing strict new limits on Iran's nuclear program. Read more here. US and Iran reach 14-point draft peace deal In a memo seen by Bloomberg, the US and Iran have agreed upon 14 points that make up a draft peace deal, to be signed by both countries in Switzerland on June 19. Ceasefire: Immediate and permanent end to war on all fronts, including Lebanon. Non-interference: The US and Iran agree on sovereignty and territorial integrity. Timeline: Reach a final agreement within a maximum period of 60 days. Blockade: United States to lift the naval blockade. Troops: The United States to withdraw its forces within 30 days. Hormuz: Iran will immediately open the Strait of Hormuz Reconstruction: The US agrees to pay Iran $300 billion in aid for rehabilitation Nuclear weapons: Iran agrees to never produce nuclear weapons. Status quo: US and Iran agree to maintain the agreement as it stands at the time of signing. Sanctions: The US will end all economic sanctions on Iran. Frozen funds: Iranian restricted or frozen funds to be released and made fully available. Implementation: A dedicated 'mechanism' to be put in place to ensure future commitment to the deal. Order of business: No agreement will be signed until 'Articles 4, 5, 10, and 11' are implemented. These being the removal of the blockade, the withdrawal of US troops, the removal of sanctions and the release of funds. United Nations: The deal is to be overseen by the binding resolution of the UN Security Council. Read more here. Recommended Stories