Ankara: US stocks closed sharply lower on Wednesday as the Federal Reserve's decision to leave interest rates unchanged fueled concerns that the central bank may be falling behind in its fight against inflation. The Dow Jones Industrial Average plunged 1,153.18 points, or 2.19%, to finish at 51,594.14, marking its biggest one-day decline since April 2025. The S and P 500 fell 1.52% to 7,316.15, while the Nasdaq Composite dropped 1.74% to 24,442.94. The VIX index, often referred to as the "fear index," surged 13.45% to 20.66 points, its highest level in around two months.
According to Anadolu Agency, the Fed maintained its federal funds target range at 3.5%-3.75%, although three policymakers voted in favor of an interest-rate increase, highlighting divisions within the central bank over how to respond to persistent price pressures. The bond market sold off following the decision, with the yield on the benchmark 10-year US Treasury note rising seven basis points to above 4.67%. The 30-year Treasury yield climbed about 10 basis points to more than 5.2%, reaching its highest level since 2007, as investors demanded greater compensation for longer-term inflation risks.
Fed Chair Kevin Warsh said the central bank would not hesitate to act when necessary, but his remarks failed to ease concerns that monetary policy remains insufficiently restrictive. Inflation worries were compounded by a sharp increase in oil prices after US President Donald Trump said Washington would hit Iran 'hard' in response to attacks on American forces in the Middle East. US benchmark West Texas Intermediate crude rose more than 6% to settle at $84.46 per barrel, raising concerns that higher energy costs could intensify broader price pressures.
Semiconductor shares extended their recent losses amid questions about returns from massive artificial intelligence investments and concerns about increasing competition from China. Micron Technology and KLA each fell around 10%, while Advanced Micro Devices lost 5.5%.
European stock exchanges also ended Wednesday mostly in negative territory as investors monitored escalating tensions between the US and Iran and assessed the outlook for monetary policy. The pan-European Stoxx Europe 600 index fell 0.29% to close at 645.01 points. France's CAC 40 dropped 0.6% to 8,408.27, Germany's DAX 40 edged down 0.01% to 25,460.48, and Italy's FTSE MIB 30 declined 0.49% to 51,443.11. Britain's FTSE 100 bucked the broader decline, gaining 0.34% to finish at 10,908.41.