Stocks fell after the Fed held rates: Wednesday recap

Stocks fell hard on Wednesday. The S&P 500 dropped 1.54% to close at 7,316.15, the Dow lost 2.18% to 51,594.14, and the Nasdaq shed 2.04% to 24,442.94. The declines built through the session and left every major average at its weakest levels of the day. It was the market’s roughest single session in weeks.

The weakness spread across almost the entire market. Ten of the eleven S&P 500 sectors finished lower. Industrials led the way down, their sector fund off 3.19%, followed closely by technology at 2.64% and financials at 1.60%. Only energy escaped. Its sector fund rose 1.88%, the day’s single green square, as crude prices pushed higher. Utilities fell 1.34% and materials 1.15%. The defensive corners of the market cushioned the blow: consumer staples actually edged up 0.34%, and health care and real estate posted only fractional losses.

The catalyst arrived in the early afternoon. The Federal Reserve left its benchmark interest rate unchanged, a decision most investors had expected but few welcomed. The vote split the committee. Three policymakers dissented in favor of a rate increase, an unusually hawkish result that pushed markets to price in a longer stretch of elevated borrowing costs. Dissents that lean toward tighter policy are rare, and investors read them as a signal the committee’s worry about inflation has hardened and the bar for future rate cuts has risen. Equities had drifted quietly ahead of the announcement. They turned sharply lower once the statement crossed.

Two other threads ran through the tape. Oil prices climbed on renewed tension in the Middle East, and that lift carried energy stocks against the broader tide. Technology moved the opposite way. A fresh slide in chipmakers deepened a weekly slump that has dragged the Nasdaq-100 tracking fund down 6.18% over the past five sessions, the steepest weekly drop among the major benchmarks. The technology sector fund has now given back 7.60% on the week.

Smaller companies offered no cover. The Russell 2000 tracking fund lost 1.64%, sinking alongside the large-caps rather than diverging from them. The sharpest move of the day came from the options market. The Cboe Volatility Index jumped 13.45% to 20.66, its highest close in weeks, a sign traders were paying up for downside protection. The 10-year Treasury yield settled at 4.61%.

The week’s scoreboard reads the same way. The S&P 500’s tracking fund has slipped 2.40% over the past five sessions and the Dow’s 1.16%, but the damage concentrates in technology, where the Nasdaq-100 fund’s 6.18% drop towers over the rest. Defensive groups have quietly moved the opposite direction. Health care and consumer staples are both higher on the week, up 4.27% and 3.53%, a rotation that has been building for days.

The week still has plenty left. A heavy slate of megacap earnings lands after Wednesday’s close and runs through Friday, and a new reading on the Federal Reserve’s preferred inflation gauge is due in the days ahead. Both will meet a market that has grown less patient than it was a few days ago. For now, the sellers set the tone.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.