Fed's Historic Division Sparks Stock Market Jitters

Last week was a crucial period for Wall Street, marked by the busiest week of the third quarter for earnings releases and a Federal Reserve interest rate decision. On July 29, when Fed Chair Kevin Warsh and the Federal Open Market Committee (FOMC) announced that they were keeping interest rates steady, the Dow Jones Industrial Average (^DJI +1.02%), S&P 500 (^GSPC +1.34%), and Nasdaq Composite (^IXIC +2.03%) plummeted. It was the worst single-session performance for the Dow in over a year.

This historic FOMC meeting had significant implications for the stock market, particularly given that it marked something that hasn't happened in 56 years at America's foremost financial institution.

Warsh inherited a historically divided FOMC, which is potentially hazardous for Wall Street. The Fed is seen as a foundational pillar to Wall Street's long-term success. As this division persists, the central bank may lose credibility, which it has taken a long time to establish.