US stocks fall after Fed hikes key interest rate

On Wednesday, US stocks declined while the US dollar strengthened following the Federal Reserve's decision to raise interest rates for the first time since 2023. Although the rate increase was expected, markets considered the central bank's message to be more hawkish than anticipated. A majority of Fed policymakers signaled that at least one more rate hike was expected before the end of 2026.

The S&P 500, a broad-based index, fell by 0.5 percent, while the Dow Jones Industrial Average dropped 1.2 percent, reaching 51,461. The Nasdaq Composite slipped by a negligible 0.01 percent, settling at 25,978. Tech shares experienced the most significant gains among the eleven major sectors of the S&P 500.

The Federal Reserve's decision to raise interest rates to between 3.75 and 4.00 percent was driven by elevated inflation. The central bank emphasized that the hike would facilitate a timely return to its two-percent inflation target.

Prior to the Fed's announcement, the major US stock indexes had been on an upward trajectory, with the tech-heavy Nasdaq leading the gains. In earlier sessions, robust retail sales data indicated that consumers continued to spend, despite affordability challenges stemming from rising prices, particularly at the gas pump.

Meanwhile, the conflict in the Middle East intensified as Saudi Arabia intensified its airstrikes on Yemen, and Iran-backed Houthi fighters retaliated with drone and missile attacks on Saudi cities. Despite the ongoing conflict, oil prices dipped following reports that Saudi Arabia would offer extra crude shipments via Oman, alleviating concerns about potential supply disruptions.