Dow sinks more than 500 points after Fed delivers soft rate hike but Powell pushes back on expectations of cuts this year

US stock market traders
Friday's inflation print shocked investors.Xinhua News Agency/Getty Images
  • US stocks fell Wednesday following the Fed's March rate decision.

  • The Fed raised raised by 25 basis points, in line with expectations.

  • But Chairman Jerome Powell said rate cuts this year at not in its baseline expectations.

US stocks swung lower Wednesday after Federal Reserve Chairman Jerome Powell tossed cold water on speculation that policymakers are set to deliver rate cuts this year.

Major indexes initially pushed higher after the Federal Open Market Committee raised the fed funds rate by 25 basis points, in line with market expectations to bring the key rate to its highest level since 2007. The rate now stands at 4.75%-5%.

Policymakers in their statement stripped out reference to "ongoing increases" in interest rates, and its view on the terminal rate remained at 5.1%.

But stocks turned lower after Powell in answering questions during his press conference indicated expectations of rate cuts this year were off track. "That's not our baseline expectation," he said. Stocks were also under pressure as  Treasury Secretary Janet Yellen said during a Senate committee hearing that regulators were not looking at providing "blanket" deposit insurance for the banking system, which has been shaken after the collapse of Silicon Valley Bank.

Here's where US indexes were at the 4:00 p.m. closing bell on Wednesday: 

"Not signaling a higher terminal rate should send a message to market participants that the economy may be weaker than recent economic data suggests," Charlie Ripley, senior investment strategist at Allianz Investment Management, wrote in a note.

"Whether this meeting ends up being the one-and-done scenario or they are able to squeeze out another hike out in May remains to be seen, but the reality from here is the Fed is likely going to emphasize a broader set of conditions in policy decisions rather than focusing specifically on inflation and labor market conditions," he wrote.

Here's what else is happening today:

In commodities, bonds and crypto: 

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