Stocks fell on Wednesday after a hotter-than-expected inflation reading and the Federal Reserve's decision to hold interest rates broadly impacted investor sentiment.
The Dow Jones Industrial Average (NYSE: DIA) dropped nearly 770 points to end the session at 46,225.15, marking a new low for the year as the index closed below its 200-day moving average. The S&P 500 Index (NYSE: SPY) fell 1.4% and the Nasdaq Composite (NASDAQ: QQQ) lost about 1.5% to close at 6,624.70 and 22,152.42, respectively.
Deepening dour outlooks, the central bank voted 11-1 to hold the benchmark federal funds rate at its current range of 3.5% to 3.75% Wednesday afternoon, stating in a post-meeting statement that the "implications of developments in the Middle East for the U.S. economy are uncertain."
However, policymakers still signaled at least one rate cut this year and another in 2027, according to the Federal Open Market Committee's "dot plot."
Fed Chair Jerome Powell said in post-meeting remarks on Wednesday that inflation is not easing as quickly as the central bank hoped, adding that "the rate forecast is conditional on the performance of the economy, so if we don't see that progress, then you won't see the rate cut."
"Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East," Powell said. "In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy."
Market sentiment was impacted earlier in the session as wholesale inflation came in hotter-than-expected in February, signaling that prices were already under pressure before the start of the United States-Iran war.
The producer price index rose 0.7% last month, the Bureau of Labor Statistics reported Wednesday, topping economists estimates and heightening stagflation concerns. Excluding food and energy costs, core PPI increased by a more-than-expected 0.5%, while also taking out trade services saw PPI rising by 0.5%.
On an annual basis, headline PPI rose 3.4%, while core jumped 3.9% in February -- coming in above the Fed's target of 2%.
Elsewhere, oil futures continued to climb higher on Wednesday after Iran threatened to target oil facilities in Saudi Arabia, the United Arab Emirates and Qatar. International benchmark Brent crude futures rose to $104 a barrel, while domestic gauge West Texas Intermediate increased to $98 a barrel.
President Donald Trump on Wednesday moved to suspend the Hones Act for 60 days in effort to stabilize oil, natural gas, fertilizer and coal prices, Press Secretary Karoline Leavitt said in a statement. The law requires that transport of goods between U.S. ports to be made by U.S. vessels and was intended to support the domestic shipping industry after World War I.
For Thursday, investors will turn their attention to key earnings reports from companies including Micron Technology (NASDAQ: MU), Alibaba (NYSE: BABA), and FedEx (NYSE: FDX).