Stock market today: Dow, S&P 500, Nasdaq rise ahead of crucial Fed interest rate decision

On Wednesday, US stock indices fell in the wake of the Federal Reserve's decision to raise interest rates by 25 basis points, signaling another hike in 2026. The Dow Jones Industrial Average dropped 1.2%, while the S&P 500 declined 0.4%. The Nasdaq Composite remained largely unchanged. Long-dated bond yields surged, with the 10-year Treasury yield surpassing the 5% mark.

The Fed's unanimous decision to hike rates was based on their Summary of Economic Projections, which showed officials anticipating one more rate increase this year. The policy action aimed to hasten the Committee's return to the 2% inflation target. Warsh, in his press conference, emphasized the importance of price stability and highlighted strong productivity growth and robust job gains in the economy.

However, he reiterated that inflation remains a major concern, stating that recent consumer and producer price data revealed continued high inflation. Despite a temporary rally in crude oil prices, Brent and WTI futures stayed above $100 per barrel. In other economic news, August retail sales increased 1.2% compared to expectations of a 0.9% rise and July's 0.5% decline, indicating that consumers continue to spend despite inflation challenges.

By the end of the day, the Dow fell over 600 points, or 1.2%, the S&P 500 slipped 0.4%, and the Nasdaq fell below flat line. Long-term bond yields rose, with the 10-year yield topping 5%. The market's reaction to the Fed's decision reflected uncertainty about future policy moves and the ongoing battle against inflation.