U.S. stocks slumped Wednesday as investors digested a mix of higher oil prices, inflation concerns, and new doubts about when the Federal Reserve might resume rate cuts. The selloff deepened after the central bank kept its main interest rate steady, while Chair Jerome Powell pointed to uncertainty about the inflation outlook. Market participants increasingly concluded that the kinds of lower rates that can lift stock valuations were less likely to return soon.
The decline came as a report released Wednesday morning showed inflation pressures were building even before the war with Iran began. It said inflation at the U.S. wholesale level unexpectedly accelerated last month to 3.4%, reinforcing worries that energy-linked price increases could spread further. Those concerns also fit with the Fed’s decision to stay on hold rather than restart cuts aimed at boosting the job market and the wider economy.
Powell said the Fed’s usual approach—looking past temporary jumps in oil—depends on whether inflation expectations themselves stay contained. He also said, about what comes next for oil and for tariffs, “We just don’t know,” describing the uncertainty around both how long higher oil prices will persist and how long Trump’s tariffs will take to move fully through the system.
In oil markets, the price of Brent crude jumped to about $107.38 per barrel on Wednesday, up 3.8% from the prior day, after hovering around roughly $70 before the war. Benchmark U.S. crude climbed to nearly $99 before settling at $96.32. The AP reported that oil and gas prices have surged because the war has disrupted the Persian Gulf’s energy industry, including an allegation by Iran’s state television that the Islamic Republic would be attacking oil and gas infrastructure in Qatar, Saudi Arabia and the United Arab Emirates following an attack on facilities associated with the offshore South Pars natural gas field.
Federal Reserve officials also indicated that their internal forecasts for rate cuts this year shifted, with several downgrading projections to one cut instead of two. Traders responded by reducing their expectations for how much the Fed will cut by the end of 2026; CME Group data cited in the report showed bets for a single rate cut falling to 49% from 95% a month earlier.
That shift contributed to higher Treasury yields, which the report said climbed as Wall Street adjusted its outlook. The yield on the 10-year Treasury rose to 4.26% from 4.20% late Tuesday and from 3.97% before the war with Iran started. With yields higher, investors moved money away from rate-sensitive assets, a pattern the AP described as weighing on stocks and other investments.
In the week’s trading, the S&P 500 fell 91.39 points to 6,624.70, the Dow Jones Industrial Average dropped 768.11 points to 46,225.15, and the Nasdaq composite sank 327.11 points to 22,152.42. The report noted that the S&P 500 had been in the red for the week so far following the slide.
Elsewhere, gold also retreated as Treasury yields climbed, according to the AP. Gold fell back below $5,000 an ounce after settling at $4,896.20, following a 2.2% drop. In individual company moves, Macy’s rose 4.7% after reporting stronger-than-expected profit and revenue, while General Mills fell 3% after reporting a weaker profit than analysts expected.
Overseas, indexes fell in Europe after a stronger finish in Asia. Japan’s Nikkei 225 rose 2.9% after the government reported February exports were higher than expected, while South Korea’s Kospi jumped 5%.