US Equity Indexes Slump as Fed Rate-Cut Expectations Sink, Producer Prices Turn Hot

05:54 PM EDT, 03/18/2026 (MT Newswires) -- US equity indexes fell on Wednesday as market expectations for interest rate cuts this year slumped following a meeting of the Federal Reserve, and producer prices rose more than forecast in February.

The Nasdaq Composite dropped 1.5% to 22,152.42, with the S&P 500 down 1.4% to 6,624.70 and the Dow Jones Industrial Average 1.6% lower to 46,225.15. All sectors were in the red, led by consumer staples, consumer discretionary, and materials.

The central bank's Federal Open Market Committee, in an 11-to-1 vote, left interest rates unchanged in a range of 3.50% to 3.75%, in line with Wall Street's expectations and marking its second consecutive pause. Policymakers, however, raised their headline and core inflation projections, as measured by personal consumption expenditures, to 2.7% each for this year, up from December's estimates of 2.4% and 2.5%, respectively. Their 2027 projections for both metrics increased to 2.2% from 2.1%.

According to the CME FedWatch tool, the probabilities that the Federal Reserve will leave interest rates unchanged at all of its policy meetings this year were above 50% following the central bank's policy meeting. A day ago, the likelihood of the rates being left unchanged was below 50% for September, October, and December.

Fed Chair Jerome Powell said the US economy was experiencing "an energy shock of some size and duration," according to a report from the Wall Street Journal. He also described service inflation as "frustrating" in a press conference that made a 2026 rate cut seem less likely.

In economic news, the producer price index for final demand increased 0.7% in February, up from 0.5% in January, and above the 0.3% gain forecast by analysts polled by Bloomberg. Core PPI, which excludes food and energy prices, increased 0.5% in February, slower than 0.8% in the previous month, but faster than the 0.3% expected in a Bloomberg survey.

"The hotter than expected number is specific to tariffs," Todd Schoenberger, CIO at CrossCheck Management, told CNBC, noting that metals, industrial inputs, and manufacturing costs are all seeing higher prices. "This is structural inflation, not temporary, and is likely going to impact monetary policy deep into the third quarter."

Chair Powell said oil wasn't the only factor his colleagues were considering while predicting inflation and interest rates, according to the CNBC report. Higher forecasts for inflation are also "a reflection of the slow progress we've seen on tariffs," Powell was cited as saying.

US Treasury yields rose, with the 10-year yield up 6.7 basis points to 4.27%. The two-year yield gained 11 basis points to 3.78%.

In company news, Micron Technology (MU) said it expects fiscal Q3 non-GAAP EPS of $18.75 to $19.55 on revenue of $32.75 billion to $34.25 billion. Analysts are looking for $12.03 and $24.29 billion, respectively. Nevertheless, shares of the chip maker closed little changed as a deterioration in interest-rate expectations hit the technology sector.

West Texas Intermediate futures jumped 3.8% to $99.82.

Oil prices surged after energy infrastructure in Persian Gulf countries came under attack, with fires reported at facilities in Qatar and aerial threats intercepted in Saudi Arabia, following a warning from Iran's Islamic Revolutionary Guard Corps, CNN reported.

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