Fed Rate Pause Sparks Inflation Concerns, Stocks Slide

U.S. stock indices closed lower on Wednesday after the Federal Reserve decided to keep interest rates unchanged for the fifth consecutive time, sparking concerns about inflation running ahead of the curve.

The S&P 500 fell 1.5%, while the Nasdaq slipped 2.1% and the Dow Jones Industrial Average lost 2.2%. The Russell 2000, which tracks small-cap stocks, dropped 1.7%.

Microsoft, Meta Platforms, and Qualcomm reported quarterly earnings after the market closed, but investors were more focused on the Fed's decision to maintain benchmark rates. This move comes as the Fed shifts its attention towards inflation, driven by energy price fluctuations resulting from the conflict in Iran, while the job market remains resilient.

The 10-year Treasury yield jumped 7 basis points to above 4.67%, and the 30-year Treasury yield soared 10 basis points to above 5.2%, hitting its highest level since 2007.