Dow slides over 500 points as Fed officials signal possible rate hike

U.S. stock indexes dropped sharply on Wednesday following Federal Reserve projections that nine of 18 policymakers anticipate at least one hike to the benchmark interest rate before year-end. The Dow Jones Industrial Average swung from a 281-point gain early in the session to a 507-point loss, down about 1%, while the Nasdaq Composite fell 1.4% and the S&P 500 slipped 1.2% after erasing earlier gains.

The Fed kept the federal funds rate unchanged at its latest meeting, but the outlook shifted as officials signaled a higher probability of future tightening. Traders now price an 84% chance of at least one rate increase this year, up from 59.5% the day before, according to CME Group data.

Chairman Kevin Warsh, speaking at his first press conference, indicated the central bank may overhaul its communication strategy, ending forward guidance that hints at future rate paths. > "I want 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," Warsh said.

Bond markets reacted with higher yields; the 10-year Treasury yield rose to 4.49% from 4.43%, and the two-year yield jumped to 4.21% from 4.05%, reflecting heightened expectations of tighter monetary policy.

Oil prices steadied, with Brent crude up 0.7% at $79.55 a barrel, remaining above pre-conflict levels but well below the recent peak of over $100.