US stocks slumped Wednesday after a report said inflation was primed to worsen even before the war with Iran sent oil prices spiking. That and comments from the head of the Federal Reserve pushed Wall Street on Wednesday to see less chance of getting the lower interest rates that it loves.
- The S&P 500 fell 91.39 points, or 1.4%, to 6,624.70. first loss this week.
- The Dow Jones Industrial Average fell 768.11 points, or 1.6%, to 46,225.15.
- The Nasdaq composite fell 327.11 points, or 1.5%, to 22,152.42.
Treasury yields climbed in the bond market, which in turn hurt the price of gold, the
AP reports. It fell back below $5,000 per ounce.
The losses deepened after the Federal Reserve decided to keep its main interest rate steady, instead of resuming cuts meant to give the job market and economy a boost. Fed officials are still penciling in one more cut to interest rates by the end of 2026, but Fed chair Jerome Powell suggested those projections may not be worth as much as usual because of how much more uncertainty there is. "We just don't know," Powell said about what will happen with oil prices, along with how long tariffs will take to work their way through the economy.
- Worries had been rising that the Fed could make zero cuts in 2026 given how much oil prices have soared. A barrel of Brent crude has jumped from roughly $70 per barrel to as high as $109.95 on Wednesday. It settled at $107.38, up 3.8% from the day before. The price for a barrel of benchmark US crude got to nearly $99 before settling at $96.32.
- Oil and natural gas prices have spiked because the war has disrupted the Persian Gulf's energy industry. Iran's state television said Wednesday that the Islamic Republic would be attacking oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab Emirates after an attack on facilities associated with its offshore South Pars natural gas field.
If the disruptions keep oil and gas prices high for long, they could send a debilitating wave of inflation crashing into the global economy. A report released Wednesday morning showed that inflation pressures were already worsening before the war began. It said inflation at the US wholesale level unexpectedly accelerated last month to 3.4%, and those cost increases could hit US households if producers pass them all along. Such numbers were likely factors in staying the Fed's hand on Wednesday. A cut to rates would have given the economy and investment prices a boost, and President Trump has been angrily calling for them. But lower interest rates would also worsen inflation. Only one Fed voter wanted to lower rates this time around, and the tally was 11-1 to keep rates steady.
On Wall Street, Macy's jumped 4.7% after reporting stronger profit and revenue for the latest quarter than analysts expected. The retailer behind Bloomingdale's and Bluemercury is in the midst of a turnaround plan to drive growth under CEO Tony Spring. But General Mills fell 3% after the company behind the Pillsbury, Progresso and Wheaties brands reported a weaker profit for the latest quarter than analysts expected. CEO Jeff Harmening is investing in its brands in hopes of driving growth, and it's sticking with its forecast for profit over the full fiscal year.
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