Stocks slide toward lowest level since July after Warsh’s hawkish press conference

Stocks slid Wednesday afternoon after Federal Reserve Chair Kevin Warsh followed the central bank’s first rate hike in three years with a press conference that hinted it wouldn’t be the last.

The S&P 500 dropped 1%, heading toward its lowest close since July.

The Dow Jones Industrial Average fell 1.7%, or more than 700 points, with financial shares leading the decline.

The Nasdaq Composite fell 0.8%.

The 10-year Treasury yield held near 5% a day after touching its highest level since 2007, and the dollar index climbed 0.6% to its strongest since late July.

Markets had priced in the quarter-point increase itself and initially took it in stride.

All three indexes were higher before the 2 p.m. decision.

The selling started during the press conference.

Warsh was on a tightrope going in.

The question was whether he’d frame the hike as a one-off adjustment—which risked the bond market reading it as too little to deter inflation—or as the start of a longer cycle.

He did neither, and instead went in a more hawkish direction.

“I would be hard pressed to describe broad financial conditions as restrictive,” he said in his opening remarks.

“This view was widely shared by the committee, so we removed a dose of accommodation.” That’s a new way of describing a rate hike, and one investors aren’t used to.

Under his predecessor, Jerome Powell, the Fed called policy “modestly restrictive,” meaning rates were already high enough to slow the economy.