NEW YORK / RankWire.AI / – On Wednesday, U.S. equities declined following the Federal Reserve increasing interest rates by 25 basis points. This move pushed the federal funds target range to 3.75% to 4.00%. The Dow Jones Industrial Average dropped 631.21 points, or 1.21%, closing at 51,461.90. The S&P 500 decreased by 34.55 points, or 0.46%, ending at 7,551.81. The Nasdaq Composite fell 3.16 points to finish at 25,978.42.
The Federal Reserve unanimously approved the rate hike during its September meeting, with a 12-0 vote. This was the first increase since July 2023. Officials stated that economic activity remained solid. Domestic spending was resilient, productivity growth strong, and capital investment robust. The Fed also noted that employment growth kept pace with the workforce, while unemployment remained stable.
Inflation was a key topic during the September 15-16 meeting. The Fed said inflation stayed high and confirmed its 2% inflation goal. The decision came after a period of holding rates steady following earlier cuts. Wednesday’s hike marked a shift in monetary policy after more than three years. By the session’s close, stocks had declined, and bond yields increased.
Federal Reserve updates economic projections
The latest forecasts showed a median 2026 federal funds rate of 4.1%. This is higher than the 3.8% median projected in June. Projections for 2027 and 2028 also rose, with median estimates of 4.1% and 3.9%, respectively. These forecasts reflect individual officials’ views on appropriate policy but do not set a fixed course for future decisions.
Official estimates suggest U.S. GDP will grow 2.3% in 2026, up from the June projection of 2.2%. The median unemployment rate estimate decreased from 4.3% to 4.1%. Inflation for personal consumption expenditures (PCE) is projected at 3.7% for 2026, with core PCE inflation—excluding food and energy—at 3.4%.
Bond yields rise as equities retreat
Treasury yields increased as major U.S. stock indexes declined on Wednesday. The two-year Treasury yield reached approximately 4.73%, while the 10-year yield climbed near 5.00%. The rise followed the Fed’s quarter-point rate hike and its updated economic outlook. The Russell 2000 index of smaller U.S. firms also decreased by about 0.4%, ending at 2,858.81. More stocks declined than advanced across key U.S. exchanges.
Despite the day’s losses, major indexes showed gains for 2026 through the close. The S&P 500 was up roughly 10.3% for the year. The Dow increased about 7.1%, and the Nasdaq advanced around 11.8%. Wednesday’s trading drew attention to interest rates, inflation, and Treasury yields in the financial markets. The Fed’s upcoming decisions will depend on data reviewed at future policy meetings.