SpaceX Falls to First Loss Since Debut

US stocks dropped Wednesday on speculation the Federal Reserve may raise interest rates this year to keep a lid on inflation.

• The S&P 500 fell 91.25 points, or 1.2%, to 7,420.10.
• The Dow Jones Industrial Average fell 507.12 points, or 1%, to 51,492.55.
• The Nasdaq composite fell 354.69 points, or 1.3%, to 26,021.66.

Stocks slumped after the Fed released projections showing nearly half its policymakers foresee at least one increase to its main interest rate this year, the AP reports. Treasury yields climbed on rising expectations for a hike to rates in 2026. Higher rates can tap the brakes on inflation, but they also slow the economy and hurt prices for investments.

One important policymaker at the Fed did not give a forecast for where the federal funds rate may end up in 2026 and the next couple years: Chairman Kevin Warsh. In his first press conference as head of the central bank, Warsh said he's also considering a revamp of how the Fed communicates with the market and US households and businesses. That includes the end of dropping hints in Fed statements about where interest rates may be heading in the future, something called "forward guidance." Warsh said he wants Wall Street to react to incoming data about inflation, the job market and other economic data based on how they affect prices for stocks, bonds, and other investments rather than how it expects the Federal Reserve to react to them.

• As part of that, Warsh said the Fed could make changes in its usual release of projections every three months showing where Fed officials suspect interest rates, the economy and inflation are heading in upcoming years. For now, though, Wall Street reacted uneasily to Fed officials' latest set of projections. Stocks zigzagged up and down several times following the release. The Fed also decided to keep the federal funds rate steady at this meeting, as it has all year so far.

In the stock market, SpaceX erased an early gain and fell 4.9% for its first loss since its ballyhooed debut on the US stock market last week. Drops of 3.8% for Microsoft, 3.5% for Amazon, and 1.3% for Nvidia were three of the heaviest weights on the S&P 500. They helped overshadow a jump of 14.8% for La-Z-Boy, which reported stronger profit and revenue for the latest quarter than analysts expected. It benefited from revenue made at newly opened stores, though Chief Financial Officer Taylor Luebke said the company continues to have "a measured view" of the broad sales environment.

In the bond market, Treasury yields climbed. The yield on the 10-year Treasury, which influences rates for mortgages and other loans going to U.S. households and businesses, rose to 4.49% from 4.43% late Tuesday. The two-year Treasury yield, which more closely tracks expectations for Fed action, jumped to 4.21% from 4.05%. Traders upped their bets for at least one increase to the federal funds rate this year and now see an 84% probability of it, up from 59.5% a day earlier, according to data from CME Group.