Worries About Higher Interest Rates Lead To Late-Day Slump On Wall Street

(RTTNews) - Stocks saw significant volatility immediately following the Federal Reserve's monetary policy announcement on Wednesday but came under considerable selling pressure in the latter part of the trading session.

The major averages all showed significant moves to the downside, closing firmly in negative territory. The Nasdaq plunged 354.69 points or 1.3 percent to 26,021.66, the S&P 500 tumbled 91.25 points or 1.2 percent to 7,420.10 and the Dow slumped 507.12 points or 1 percent to 51,492.55.

The weakness that emerged on Wall Street came after the Fed left interest rates unchanged as widely expected, but officials' projections suggest some see the possibility rates could be higher by end of the year.

The Fed said it decided to maintain the target range for the federal funds rate at 3.5 to 3.75 percent, citing its dual goals of maximum employment and inflation at the rate of 2 percent over the longer run.

The median projection suggests officials expect interest rates at 3.8 percent by the end of 2026, hinting at a possible rate hike compared to the rate cut forecast in March.

In a significantly pared down statement, the Fed said economic activity is expanding at a solid pace despite elevated uncertainty due in part to the conflict in the Middle East.

The statement also noted inflation remains elevated relative to the Fed's 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.

Earlier in the day, the Commerce Department released a report showing retail sales in the U.S. increased by much more than expected in the month of May.