Stocks fall, bond yields tumble after Federal Reserve's latest interest rate hike

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 1.6% for its first drop in three days. The Dow Jones Industrial Average lost 530 points, or 1.6%, while the Nasdaq composite dropped 1.6%.

Some of the sharpest drops came again from the banking industry, where investors are worried about the possibility of customers yanking their cash to cause more collapses. 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 bigger question was where the Fed is heading next. There, the Fed gave a hint it may not hike rates much more as it assesses the fallout from the banking industry's crisis.

Instead of repeating its statement that “ongoing increases will be appropriate,” the Fed said Wednesday that it now only sees “some additional policy firming may be appropriate.” Chair Jerome Powell emphasized the shift to “may” from “will.”

The Fed also released the latest set of projections from its policy makers on where rates are heading in upcoming years. The median forecast had the federal funds rate sitting at 5.1% at the end of this year, up only a smidge from where it currently sits, in a range of 4.75% to 5%.

That's also the same level as seen in December, and it's counter to worries in the market that it could rise given how stubborn high inflation has remained.

All told, 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.