WASHINGTON (dpa-AFX) - 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.
The Commerce Department said retail sales grew by 0.9 percent in May after rising by a downwardly revised 0.4 percent in April.
Economists had expected retail sales to climb by 0.5 percent, matching the increase originally reported for the previous month.
Sector News
Software stocks moved sharply lower over the course of the session, dragging the Dow Jones U.S. Software Index down by 3.2 percent to its lowest closing level in two months.
Substantial weakness was also visible among transportation stocks, with the Dow Jones Transportation Average plunging by 3 percent.
Retail stocks also saw significant weakness despite better-than-expected retail sales data, resulting in a 2.9 percent slump by the Dow Jones U.S. Retail Index.
Oil service, gold, commercial real estate stocks also came under pressure on the day, while brokerage and semiconductor stocks bucked the downtrend.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while China's Shanghai Composite Index climbed by 0.4 percent.
Meanwhile, the major European markets turned in a mixed performance on the day. While the French CAC 40 Index dipped by 0.2 percent, the German DAX Index and the U.K.'s FTSE 100 Index both inched up by 0.1 percent.
In the bond market, treasuries came under pressure following the Fed announcement, closing firmly negative. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 3.5 basis points to 4.463 percent.
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