Dow Drops 768 Points Amid Inflation Worries
AP Photo/Seth Wenig
U.S. stocks dropped sharply on Wednesday after new data suggested inflation pressures were building even before the conflict with Iran drove oil prices significantly higher. The combination of that report and remarks from Federal Reserve leadership reduced expectations on Wall Street that interest rates will be lowered anytime soon.
The S&P 500 declined 91.39 points, or 1.4%, finishing at 6,624.70 and recording its first loss of the week. The Dow Jones Industrial Average fell 768.11 points, or 1.6%, ending the day at 46,225.15. The Nasdaq composite dropped 327.11 points, or 1.5%, closing at 22,152.42.
In the bond market, Treasury yields moved higher, a shift that weighed on gold prices. Gold slipped back under $5,000 per ounce. Market losses grew deeper after the Federal Reserve announced it would keep its key interest rate unchanged rather than restarting rate cuts that could stimulate hiring and economic growth.
Federal Reserve officials still expect one additional rate cut before the end of 2026. However, Fed Chair Jerome Powell indicated those projections are less certain than usual due to growing economic unknowns. Powell said officials remain unsure about how oil prices will evolve or how long tariffs will take to fully affect the economy.
Concerns had already been building that the Fed might not cut rates at all in 2026 as oil costs surged. Brent crude oil climbed from around $70 per barrel to as high as $109.95 during Wednesday’s trading before closing at $107.38, up 3.8% for the day. U.S. benchmark crude briefly approached $99 per barrel before settling at $96.32.
Energy prices have risen sharply as the war disrupts the Persian Gulf’s energy sector. Iranian state television reported Wednesday that Iran planned to target oil and gas infrastructure in Qatar, Saudi Arabia, and the United Arab Emirates following an attack on facilities linked to its offshore South Pars natural gas field.
If energy prices remain elevated for an extended period, economists warn it could trigger a new wave of inflation across the global economy. Data released Wednesday morning showed inflationary pressures had already been strengthening before the conflict began. The report indicated U.S. wholesale inflation unexpectedly accelerated to 3.4% last month. Those higher costs could eventually reach consumers if businesses pass them along.
The inflation data likely influenced the Federal Reserve’s decision to hold rates steady. Lowering rates could help stimulate economic activity and financial markets, and President Trump has strongly pushed for reductions. However, cutting rates could also risk pushing inflation higher.
Only one voting member of the Federal Reserve supported lowering rates at this meeting, resulting in an 11–1 vote to keep them unchanged.
Individual companies saw mixed results on Wall Street. Macy’s shares rose 4.7% after the retailer reported quarterly profits and revenue that exceeded analysts’ expectations. The company, which operates Bloomingdale’s and Bluemercury, is working to expand growth under CEO Tony Spring as part of a broader turnaround strategy.
General Mills moved in the opposite direction, falling 3% after reporting quarterly profits that came in below analysts’ forecasts. The company behind brands such as Pillsbury, Progresso, and Wheaties said it continues investing in its brands to encourage future growth and is maintaining its profit outlook for the full fiscal year.
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