Reactive Wall Street is down sharply

Stocks fall, bond yields tumble after latest rate hike by the Fed

NEW YORK — Stocks fell sharply Wednesday after the Federal Reserve indicated the end may be near for its economy-crunching hikes to interest rates, but it also doesn’t expect to cut rates anytime soon despite Wall Street’s hopes.

The S&P 500 fell 65.90 points to 3,936.97. The Dow dropped 530.49 to 32,030.11, and the Nasdaq fell 190.15 to 11,669.96.

Some of the sharpest drops came again from the banking industry, where investors are worried about the possibility of more banks failing if customers pull out their money all at once.

They slid after Treasury Secretary Janet Yellen said she’s not considering blanket protection for all depositors at all banks, unless they present a risk to the overall system.

Stocks had been little changed for much of the day, before the Fed raised its key rate by a quarter of a percentage point in its campaign to drive down inflation. The move was exactly what Wall Street was expecting.

The yield on the two-year Treasury, which tends to track expectations for the Fed, tumbled to 3.96 percent from 4.13 percent just before the Fed policy makers’ projections were released. It was above 5 percent earlier this month.

Some of this month’s slide also came from building hopes for rate cuts later this year by the Fed. Such cuts can boost prices for stocks, bonds and other investments while giving the economy more room to breathe. They also, though, can give inflation more fuel.

Markets around the world have pinballed sharply this month on worries the banking system may be cracking under the pressure of much higher rates. They found some strength recently after Yellen indicated on Tuesday the government may back depositors at more weakened banks if the system is at risk.

That could mean making sure even customers with more than the $250,000 limit insured by the Federal Deposit Insurance Corp. can get all their money. On Wednesday, though, Yellen said that she wasn’t considering blanket protections for all depositors at all banks, only for those “when it’s deemed to be a systemic risk.”

Stocks of smaller- and mid-sized banks fell sharply. First Republic Bank dropped 15.5 percent, and Pacwest Bancorp. fell 17.1 percent.

Some of the biggest excitement was around what are called “meme stocks.”

Gamestop shot up

35.2 percent after it reported a surprise profit for its latest quarter. Analysts were expecting another loss for the video-game retailer.