[New York = E-Daily Seong Joowon Correspondent] On the 16th (local time), the New York stock market closed lower across the board following the U.S. Federal Reserve’s (Fed) first interest rate hike in more than three years and hawkish remarks by Fed Chairman Kevin Warsh. Investor sentiment was dampened not so much by the expected 0.25 percentage point hike itself, but rather by the Fed’s suggestion of further rate hikes and Chair Wash’s strong caution regarding persistent inflation.

On that day, the Dow Jones Industrial Average closed at 51,461.90 on the New York Stock Exchange (NYSE), down 631.21 points (1.21%) from the previous session. The S&P 500 index fell 0.44% to 7,551.81, and the Nasdaq Composite Index closed down 0.01% at 25,978.43.
All three major indices had been rising in unison until the Federal Reserve’s interest rate decision, at which point the market sentiment reversed. Since the Fed’s 0.25 percentage point rate hike had been anticipated by the market with a probability of over 90%, the initial shock following the announcement was minimal. However, during Chairman Wash’s press conference, which began at 2:30 p.m., a series of hawkish remarks regarding inflation caused stock prices to turn lower and accelerate their decline.
The Fed raised the benchmark interest rate by 0.25 percentage points from the previous range of 3.50–3.75% to 3.75–4.00%. This marks the first rate hike in three years and two months, since July 2023. All 12 voting members voted in favor of the hike. In the dot plot, 16 of the 18 members who submitted projections believed at least one additional rate hike this year would be appropriate.
At a press conference, Chair Wash stated, “The plain fact is that inflation has been too high for too long,” adding, “This summer’s price data does not show a meaningful improvement in the underlying trend.” He noted that current financial conditions “hardly qualify as tight” and described this rate hike as “removing some of the easing.”
Caution regarding prolonged monetary tightening also emerged in the bond market. According to The Wall Street Journal (WSJ), the yield on the 10-year U.S. Treasury note, which had been hovering around 4.95% prior to the Fed’s decision, rose above 5% following Wash’s press conference and closed the day at 5.003%. This marks the first time in 19 years that the 10-year yield has closed above 5%. The 2-year yield, which is sensitive to monetary policy, rose by about 6 basis points (1 bp = 0.01 percentage point) during the session to 4.72%. The dollar also strengthened.
Financial stocks, in particular, fell sharply. Amid concerns that further rate hikes could weigh on loan growth and economic momentum, Bank of America and Wells Fargo fell by about 3% during the session, while major bank stocks such as Goldman Sachs and Citigroup also traded lower. In contrast, Intel rose on reports that it is discussing semiconductor production in the U.S. with SK Hynix, which helped limit the decline in tech stocks to some extent.
Wall Street’s focus has now shifted to the timing and number of additional rate hikes. The interest rate market currently prices in a roughly 50% probability that the Fed will raise rates again at the upcoming FOMC meeting in October. Shima Shah, Chief Global Strategist at Principal Asset Management, noted, “The debate has now shifted from whether rates will rise again to how many more hikes there will be.”