Fed stays on hold, Wall Street slides, oil jumps, ASX set to fall
Stan Choe
Oil prices continued to rise and are near their highest levels since 2022. That jump, along with hints from some Federal Reserve officials that they do not want to cut interest rates anytime soon, caused tremors in the U.S. bond market, but U.S. stocks fell only modestly.
The S&P 500 fell 0.4 percent and was heading for a second decline after hitting an all-time high. The Dow Jones fell 394 points, or 0.8 percent, and the Nasdaq composite fell 0.4 percent.
The Fed left its benchmark interest rate unchanged for the third consecutive meeting, but signaled that it might still cut interest rates in the coming months; these moves attracted the most opposition since October 1992. Three officials opposed in favor of removing the reference to a future rate cut, while a fourth official, Stephen Miran, opposed in favor of an immediate rate cut.
Outgoing Fed chairman Powell said he will remain on the Fed board after his term as chairman ends for an “indefinite period of time.” The Senate Banking Committee previously approved Trump appointee Kevin Warsh, Powell’s successor, on a party-line vote.
The Australian share market is poised for a decline, with futures pointing to a loss of 77 points, or 0.9 per cent, at the open. The ASX lost 0.3 per cent on Wednesday. The Australian dollar fell to 71.07¢.
The action was more dramatic in the oil market, where the price of a barrel of Brent crude for delivery in July rose 5.8 percent to $110.41 per barrel. This is where most of the trading in the Brent market takes place, and it rose as high as $111.50 earlier in the day.
The highest price reached since the start of the war with Iran was $119.50 in the most actively traded Brent contract last month. On Wednesday, the price of a barrel of Brent crude oil for delivery in June, which is traded less than the July contract, briefly surpassed that level. It rose to $119.76.
Oil prices rose as President Donald Trump appeared willing to maintain a US blockade of Iranian ships that prevent the country from making money selling oil. Iran is keeping the Strait of Hormuz closed to other oil tankers hoping to carry crude oil to customers around the world as long as the blockade continues.
High oil prices are one of the reasons the Fed cited Wednesday when it said it was delaying resuming interest rate cuts. While low interest rates can stimulate the economy, they also run the risk of worsening inflation.
All three Fed officials said in their meetings that they did not want to include anything in the central bank’s statement announcing the decision that suggested further cuts might come.
Treasury yields rose in the bond market immediately afterwards, adding to gains made earlier in the day due to rising oil prices. The yield on the 10-year Treasury note rose to 4.40 percent from 4.36 percent at the end of Tuesday.
The two-year Treasury yield, which more closely tracks expectations for Fed action, rose further. It increased from 3.84 percent to 3.91 percent. Traders still largely expect the Fed to keep interest rates steady through the end of this year, according to data from CME Group. But they are counting on a small chance of a rate hike once again.
Still, the U.S. stock market has remained largely resilient, with more companies reporting stronger profit growth at the start of 2026 than analysts expected.
Visa rose 9 percent after delivering stronger results than analysts expected, and CEO Ryan McInerney said consumer spending remained resilient in the quarter. Starbucks also rose 8.9 percent after reporting better-than-expected results and saying its customers were spending more with each visit, especially at its North American stores.
However, those who failed to meet expectations were punished. GE Healthcare Technologies fell 12.6 percent after falling short of analysts’ estimates. Robinhood Markets fell 14.7 percent after reporting profit growth wasn’t as strong as analysts expected.
Booking Holdings was caught between losses and gains after the online travel company said the war with Iran affected its results and prevented some potential customers from booking rooms in the last quarter.
The company behind Booking.com, Priceline and other brands expects the dispute to continue affecting its business until the end of June. This could affect travel not only in the Middle East but also in key transit corridors between Europe and Asia.
Indices in foreign stock markets fell in Europe after the strong closing in Asia. Hong Kong’s Hang Seng index made one of the world’s strongest moves, rising 1.7 percent.
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