As expected, the FOMC raised the federal funds target rate a quarter point on Wednesday, from 3.50-3.75% to 3.75-4.00%.
Stock market participants were unsurprised, but expressed their discomfort by sending stocks lower upon the announcement, which was brief:
The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.
Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Inflation remains elevated. Today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability.
As is now standard practice by the Fed, the statement was terse and to the point, without revealing any bias toward future rate policy decisions. The Fed has two more FOMC meetings scheduled before the year's end. One on October 27-28, and the final meeting of the year on December 8-9.
The vote being unanimous, it can safely be assumed that all board participants are aligned to tackle inflation first and foremost, regardless of Wall Street or Washington's opinions on the matter. Immediate reaction to the decision sent stocks briefly lower, but rebounding within minutes, the NASDAQ actually marking the high of the day. However, the quick uptick was reversed in a manner that has become common recently. As soon as Chairman Warsh took to the podium for the 2:30 pm ET press conference, stocks began to exhibit volatility.
As Chairman Warsh answered questions from the press, the entire market convulsed, but the direction was clearly to the downside. In the short run, Wall Street finds a quarter percent hike to be hardly restrictive, but on the fixed income side, yields began to spike higher, though they remained slightly below recent levels. The general perception overall is that the Fed is acting in a responsible manner, which may not be the best of cases for stocks and longer-dated treasury maturities.
By the time Warsh was finished with his statement and answering questions - almost exactly 30 minutes - all of the major indices were in the red, led by the Dow, which, by 3:00 pm ET had dropped more than 500 points from the previous close.
With the policy statement and press conference concluded, traders set about their business for the final hour of trading, and the consensus was, like the Fed's policy decision, unanimous. Stocks traded sharply lower for the remainder of the session, with uncertainty filling the void of the future.
Thus, stocks ended lower across the board for the seventh time in the last eight sessions. Clearly, Wall Street needed more assurance from the Fed rather than a sharp kick in the teeth, which is exactly what Warsh and the FOMC delivered.
What perhaps was even more astounding was the reaction in precious metals on the COMEX. Gold and silver both fell sharply on the announced rate hike in the belief that higher fixed income yields would make precious metals less attractive, a sentiment espoused by the absolute haters of real money, the very fiat pushers who love cheap currencies. In their convoluted world, higher bond yields are the antithesis of yield-less gold and silver, when research shows, time and again, that gold and silver out-perform stocks and bonds during high rate epochs, which are normally associated with high inflation, thus producing low REAL yields. For reference, gold and silver both were substantially higher during the 1970s, when interest rates and inflation were through the roof. The same occurred through 2024 to 2025, when inflation roared and interest rates were hiked.
The momentary bust in precious metals is not likely to last veyr long. Soon enough, bargain hunters and devoted acolytes to real money will see the opportunity as gold and silver stand as the only sensible alternative to endless money creation, debt, and debased fiat currencies.
All things considered, market participants aren't pleased with the state of play. The sharp uptick in stocks in the last half hour of the session Wednesday was likely due to 0DTE options players successfully covering their downside bets.
Treasury yields rose as expected by the day's end with the 10-year note yielding 5.01% and the 30-year offering 5.35% yield.
Conditions aren't exactly bleak, but they're nowhere near rosy, either. Seven down days in eight seems to be indicative of a trend that is just beginning to gather momentum.
At the Close, Wednesday, September 16, 2026:
Dow: 51,462.14, -630.97 (-1.21%)
NASDAQ: 25,978.42, -3.15 (-0.01%)
S&P 500: 7,551.81, -33.92 (-0.45%)
NYSE Composite: 23,919.04, -209.42 (-0.87%)
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