Dow Slides 1.2% After Fed Lifts Rates to 3.75%–4.00%

U.S. stocks sold off Wednesday after the Federal Reserve delivered its first rate increase since 2023 and signaled the tightening campaign may not be finished. The Fed unanimously raised its benchmark interest rate by 25 basis points to 3.75%–4.00%. Policymakers said inflation remains elevated even as the economy continues to grow at a solid pace. Stocks whipsawed immediately after the decision, then losses deepened as investors weighed the risk of additional hikes. The Dow Jones Industrial Average fell 1.2% to 51,461.90, a drop of more than 600 points and the weakest performance among the major indexes. The S&P 500 declined 0.4% to 7,551.81. The Nasdaq Composite was nearly unchanged, edging down less than 0.1% to 25,978.42. The Russell 2000 slipped about 0.4%. The move extended a rough week for equities. The S&P 500 is down about 1.4% for the week, while the Dow has lost 2.1% and the Nasdaq is off 1.3%. Investors were less rattled by the quarter-point hike itself, which markets had largely priced in, than by the Fed's forward guidance. New projections showed 16 of 18 policymakers expect at least one additional 25-basis-point increase before the end of 2026. Fed Chair Kevin Warsh said the economy remains strong but called inflation a significant ongoing problem. Higher interest rates can pressure stocks by raising borrowing costs and making bonds more attractive relative to equities. Treasury yields jumped after the announcement. The 2-year yield rose to around 4.74%, and the benchmark 10-year yield touched roughly 5%, reinforcing a backdrop that has weighed on equities, particularly higher-valued growth shares. In commodities, Brent crude fell about 2.7% to around $105.83, offering a modest tailwind for risk assets. Energy prices remain elevated enough to keep inflation concerns in focus. With the September hike marking the first increase in more than three years, the Fed made clear its inflation fight is not over, and another move later this year remains possible. For markets, upcoming inflation data, oil prices and Treasury yields are set to take on even greater importance. The Nasdaq's relative stability suggests investors have not abandoned technology, but the Dow's 600-plus-point drop and a 5% 10-year yield underscore how quickly Wall Street is adjusting to a higher-rate environment.