Wall Street ended Wednesday deep in the red after Federal Reserve Chair Kevin Warsh delivered a hawkish shock in his debut as chair of the FOMC, erasing an early-session gain driven by a stronger-than-expected retail sales report. All three major indexes finished well off their highs, with growth and technology stocks bearing the brunt of the selling as bond yields surged and investors repriced the odds of a rate hike later this year.
What Moved Markets
The Dow Jones Industrial Average shed 524.86 points, or 1.01%, to close at 51,474.81. The S&P 500 dropped 91.19 points, or 1.21%, finishing at 7,420.16. The Nasdaq Composite fell the most, losing 354.69 points, or 1.34%, to close at 26,021.66.
The session started on a cautiously optimistic note after the Commerce Department reported that May retail sales jumped 0.9% from April – nearly double the 0.5% economists had forecast. The core “control group” measure, which strips out volatile categories like gas stations and auto dealers, rose 0.7%, suggesting the American consumer remained resilient despite the ongoing conflict in the Middle East and its upward pressure on energy prices. Yields nudged higher after the data, but stocks held their footing heading into the afternoon.
Then came the Fed. Warsh left the federal funds rate unchanged at 3.50%-3.75% for the fourth consecutive meeting, but the statement and dot plot that followed were far more aggressive than the market had anticipated. Nine of 18 FOMC officials now project at least one rate hike in 2026, a dramatic shift from prior projections that had leaned toward extended holds or even cuts. The committee also stripped out its previous reference to “additional rate adjustments,” adopting a purely data-dependent stance with no easing bias. The median forecast now shows the fed funds rate ending 2026 at 3.8%, up from 3.4% in the March projections. Two-year Treasury yields, which are most sensitive to Fed policy expectations, jumped 14 basis points to their highest level in over a year, and traders moved the probability of a September rate hike to roughly 49% – up from 27% the prior day. Stocks sold off hard from there.
Notable Movers
Semiconductors (NVDA, AMD, INTC, MU, AVGO): The chip sector was the day’s biggest drag. Advanced Micro Devices (AMD) tumbled 7.3%, Intel (INTC) dropped 8.5%, Micron Technology (MU) fell 6.2%, Broadcom (AVGO) lost 4.4%, and Nvidia (NVDA) shed 2.4%. The group had surged Monday, and the combination of rising rates – which compress valuations on high-multiple growth stocks – and some post-rally profit-taking proved too much. The Philadelphia Semiconductor Index (SOX) fell roughly 5.7% on the session.
SpaceX (SPCX): Shares of SpaceX, which went public on Nasdaq last week in the largest IPO in exchange history, fell 4.2% Wednesday as investors digested the company’s announcement that it would acquire AI coding startup Cursor in a $60 billion all-stock deal. The acquisition, announced Tuesday after the close, raised eyebrows on valuation – Morningstar cut its fair value estimate to $62 per share, implying steep downside from current levels. SPCX had risen roughly 5% Tuesday on the news before giving back gains alongside the broader market Wednesday.
ICCM (IceCure Medical): Shares of the medical device company surged 187% after reporting a 70% jump in the U.S. commercial install base for its breast cancer cryoablation system. The news was a catalyst for short-covering and momentum buying, making it the session’s biggest percentage gainer among mid-and small-cap names.
Fathom Holdings (FTHM): The real estate technology company jumped 77% after announcing a buyout deal, offering shareholders a significant premium to the prior close and triggering one of the day’s most dramatic single-stock moves outside the biotech space.
Lionsgate Studios (LION): Shares climbed 13.85%, continuing a run tied to positive momentum in its content pipeline and studio operations, bucking the broader market weakness in media names.
Looking Ahead
Thursday’s calendar includes weekly jobless claims and housing starts data, both of which will be read closely in the context of Warsh’s newly hawkish Fed. Investors will also hear from several regional Fed presidents who may offer further color on what shifted the committee’s thinking so sharply. On the earnings front, Accenture (ACN) and Kroger (KR) are scheduled to report before the open Thursday – ACN in particular will be watched for commentary on enterprise AI spending, a topic that has become a central narrative for the technology sector this year. With rates now clearly biased higher and the summer months historically prone to volatility, investors should brace for further choppiness until the inflation picture offers a clearer signal.