Dow closes 500 points lower after the Fed delivers another aggressive rate hike

Stocks wavered on Wednesday but finished the session deep in the red after the Federal Reserve announced another 75 basis point rate hike.

The Dow Jones Industrial Average shed 522.45 points, or 1.7%, to close at 30,183.78. The S&P 500 slid 1.71% to 3,789.93 and the Nasdaq Composite dove 1.79% to 11,220.19.

— Samantha Subin

Eighteen of the 20 stocks that slid the most in the S&P 500 were companies in the entertainment and travel industries — sectors that get hit hardest during an economic downturn.

Hotel-and-casino giant Caesars led the pack, down about 7.5%.

The companies sliding the most represented a wide swath of sub-industries, including:

• Hotels and resorts (Hilton, Marriott, Wynn, Host Hotels & Resorts, Las Vegas Sands)
• Live events (Live Nation)
• Casinos (MGM)
• Online travel booking services (Expedia, Booking Holdings)
• Cruise lines (Carnival, Royal Caribbean)
• Entertainment brands (Warner Bros. Discovery, Paramount, Fox)
• Airlines (United, Delta)

Mining company Freeport-McMoRan and health tech company Catalent were the only companies in the top 20 decliners not within the entertainment and travel industries.

— Alex Harring

Stocks stooped to session lows heading into the close following a volatile trading session after the Federal Reserve's rate decision.

The Dow Jones Industrial Average slid 430 points, or 1.42%, while the S&P 500 and Nasdaq Composite slumped 1.5% each.

— Samantha Subin

Even though the Federal Reserve just delivered its third consecutive 0.75 percentage point rate hike to tamp down inflation, markets are looking for any reason for a dovish read, said Kevin Gordon, senior investment research manager at Charles Schwab.

"Parts of the equity market don't buy that they're going to continue to keep their foot on the brake," he said.

He added that it's clear that markets react – and often rally – any time that Fed chair Powell mentions any softening of economic data or signs of lower growth. That's because investors are hoping that the Fed pauses and pivots to rate cuts sooner rather than later.

That's unlikely, though, according to Gordon.

"Pain is sort of a code word for recession," he said, commenting on Powell's use of the word in his Wednesday press conference that he first used in his Jackson Hole speech in August.

—Carmen Reinicke

Following Wednesday's 75 basis point increase, Glenmede estimated the federal funds rate now sits close to neutral and could surpass it with future rate hikes. That should give investors pause, said one of its investing chiefs.

"Given the stubborn inertia of inflation and the Fed's will to fight it, prevailing premium valuations on equities do not appear justified given the material risks facing the economy and corporate profits," said Jason Pride, Glenmede's private wealth chief investment officer. "As a result, investors should maintain an underweight to equity/market risk."

Pride also noted that the Fed's economic projections show the median respondent expecting slower economic growth and an increased unemployment rate.

That is "essentially an admission that economic pain will likely be tolerated as an incidental effect from rising interest rates meant to combat inflation," he said.

— Alex Harring

Stocks are finally coming around to the idea that the Federal Reserve is willing to push the economy into a recession to tame inflation, according to Chris Zaccarelli, chief investment officer of Independent Advisor Alliance.

"The market is beginning to believe that the Fed is willing to cause a recession in order to bring inflation back down," said Zaccarelli.

He added that it seems that a recession scenario is about two-thirds priced in because stocks are down about 20% from all-time highs, instead of 30%.

"We would continue to exercise caution in the near term as the Fed is determined to keep raising rates until inflation begins to drop closer to their Fed Funds target," he said.

—Carmen Reinicke

Tech stocks led a bounce in the S&P 500 that pushed the broad market index up about 1% on the day at one point.

As of 2:49 p.m. ET, the S&P 500 tech sector was up 1%, with Nvidia, DXC Technology and Skyworks among the best performers. Megacap tech stock Microsoft was also up more than 1%.

— Fred Imbert

Stocks rebounded from their session lows as Powell began his news conference.

The Dow and S&P 500 hovered around the flatline as of 2:40 p.m., while the Nasdaq Composite traded 0.1% higher. The major averages were down sharply after the Fed announced its decision to raise rates by 75 basis points — giving up gains from earlier in the day.

— Fred Imbert

The Federal Reserve raised interest rates by 0.75 percentage point Wednesday, its third consecutive hike of that size, to cool down high inflation.

The central bank also raised its terminal rate - how far it expects to hike before pausing - to 4.6% in 2023. By the end of the year, it will get to 4.4%, which means there's at least one more 0.75 percentage point hike coming.

That's more than some expected and potentially signals that the Fed is willing to push the U.S. economy into a recession.

"The extent of the aggressiveness that the Fed is signaling did indeed surprise us," said Mark Cabana, head of U.S. short rates at Bank of America. "This is very consistent with the recent shift in commentary from the Fed, and it certainly sounds like a Fed that is absolutely okay risking recession, bringing inflation lower with restrictive monetary policy."

—Carmen Reinicke, Patti Domm

The major averages gave up gains from earlier in the day after the Fed raised rates and said it sees the terminal rate going to 4.6%.

The Dow, which was up more than 100 point heading into the announcement, was last down more than 200 points. The S&P 500 and Nasdaq were also lower.

—Fred Imbert

Here are some of the stocks making the biggest moves during midday trading:

• Freyr Battery — Shares of the electric vehicle battery maker shot up 17.6% after Morgan Stanley said the company's price target was double where it is now. The bull estimate for the price was three times over its current price.
• Stitch Fix — Stitch Fix was up about 12%, even after the company posted downbeat quarterly numbers. The online styling company lost 89 cents per share in the previous quarter on a net revenue that was down 16% from the same quarter a year ago.
• General Mills — Shares of the food producer jumped 7% after the company posted a better-than-expected quarterly profit. General Mills also raised its full-year sales forecast amid higher prices and strong demand for cereal, snacks and pet food.

Read the the full list of stocks here.

— Sarah Min

Prepare for a brief market rally after the Federal Reserve doles out its rate hike decision on Wednesday, Wolfe Research's Chris Senyek says.

"Our sense is that markets could be set up for a short-lived relief rally if the Fed hikes by +75bps and Powell doesn't ratchet up his hawkish rhetoric even further," he wrote in a note to clients. "That said, we don't anticipate having to change our intermediate-term bearish call."

Going forward, Senyek expects core inflation to remain sticky. That will likely force the Fed to raise the fed funds rate to 5% or greater if it hopes to achieve its long-term goal of 2%.

Vital Knowledge's Adam Crisafulli agreed with Senyek's sentiment.

"The consensus view is that stocks will squeeze after the Fed this afternoon before surrendering the whole move and then some Thurs, Fri, and beyond," he said in a note to clients Wednesday.

— Samantha Subin

The yield on the 2-year Treasury note hit above 4% for the first time since 2007 on Wednesday as traders questioned whether the Federal Reserve will need to hike even further to tame surging inflation.

The 2-year Treasury yield rose 4 basis points to 4.006%. It last touched that level in October 2007. The yield on the benchmark 10-year Treasury was last trading at 3.561%, down by roughly 1 basis points, after notching an 11-year high this week.

According to some investors, the inversion — which continues to put short-term rates above long-term rates — indicates rising risks of a recession ahead.

— Fred Imbert, Samantha Subin

General Mills and Northrop Grumman were the only two stocks in the S&P 500 to hit new 52-week highs during Wednesday morning trading.

General Mills is trading at all-time highs dating back to 1927, and Northrop Grumman is at its highest point since the 1994 merger between Northrop Aircraft and Grumman Aerospace.

Meanwhile, eight stocks in the broader market index hit new 52-week lows, including Match Group, which is trading at an all-time low since its 2015 IPO.

Here are the new S&P 500 52-week lows:

• Charter Communications trading at lows not seen since March 2020
• Meta Platforms trading at lows not seen since March 2020
• Match Group trading at all-time lows back to its IPO in November 2015
• Verizon trading at lows not seen since August 2015
• Cooper Companies trading at lows not seen since July 2020
• Southwest trading at lows not seen since August 2020
• Catalent trading at lows not seen since October 2020
• Micron trading at lows not seen since November 2020

— Christopher Hayes, Sarah Min

Oil futures have given up their overnight gains that followed Russian president Vladimir Putin's announcement of a partial military mobilization for the war in Ukraine.

Futures for U.S. benchmark West Texas intermediate were down 0.2% to $83.77 per barrel. European benchmark Brent crude futures were trading flat at $90.67 per barrel.

While the ongoing war and sanctions on Russia have pressured energy supply, particularly in Europe, oil prices have trended downward in recent months in part because concerns about a global recession have damped the outlook for demand.

— Jesse Pound

Sectors in the S&P 500 with a defensive tilt led most of the gains in the benchmark index on Wednesday.

All 11 sectors — with the exception of communication services — were positive. Utilities and consumer staples were the best-performing areas, rising more than 1% each. Real estate and industrials also added 1%.

— Samantha Subin

Existing home sales declined in August at the slowest monthly pace since June 2020, the National Association of Realtors said Wednesday.

Sales of previously owned homes fell 0.4% in August from last month to seasonally adjusted annualized rate of 4.80 million units and were 19.9% lower year over year.

— Diana Olick, Samantha Subin

Stocks opened higher on Wednesday as investors looked ahead to the Federal Reserve's interest rate decision. The Dow Jones Industrial Average gained 171 points, or 0.56%. The S&P 500 climbed 0.57%, and the Nasdaq Composite added 0.34%.

— Samantha Subin

In addition to its expected interest rate hike, the Federal Reserve has multiple other items on the docket for its two-day meeting that concludes Wednesday.

The central bank is expected to raise benchmark interest rates by 0.75 percentage point.

But along with that, it also will provide updates on its economic and rates forecasts over the next three years. Pivotal in that outlook will be the "terminal" rate, or point when the Fed thinks it will need to stop hiking to battle runaway inflation.

Chairman Jerome Powell also will hold his traditional post-meeting news conference, where he is expected to emphasize the Fed's commitment to battling inflation even if it means harm to the broader economy.

"Fighting inflation is job-one," said Eric Winograd, senior economist at AllianceBernstein. "The consequences of not fighting inflation are greater than the consequences of fighting it. If that means recession, then that's what it means."

—Jeff Cox

Investors should prepare for more upset following the Federal Reserve's latest rate-hike meeting as inflation numbers show persistent pressures beyond just food and energy, said Comerica Wealth Management's John Lynch.

"Investors will be looking for clarity on the extent of the Fed's tightening campaign and we suspect they'll be disappointed," he said, adding that the inflation moves further complicate the Fed's decision making.

Given this backdrop, Lynch expects equities to retest June lows and believes third-quarter earnings — and revisions to companies' guidance — will muddle investor sentiment.

"Fortunately, history shows improved market performance following midterm elections, so we encourage investors to maintain targeted allocations," he said.

— Samantha Subin

Energy earnings have widely outperformed the broader S&P 500 this year, but Credit Suisse's Jonathan Golub expects the tables to turn come 2023.

"While Energy EPS is forecasted to grow 100%+ in 2022, Financials and TECH+ earnings are projected to experience an outright contraction," he wrote in a note to clients Wednesday. "However, these distortions are expected to reverse in 2023, with Energy EPS predicted to contract -12% while, Financials and TECH+ earnings are projected to grow double-digits."

Earnings growth for the S&P 500 is expected to grow by just 6.1% during the first half of 2023, but expand by 9.1% through the second half.

— Samantha Subin

The Teucrium Wheat Fund and Teucrium Corn Fund rose pre-market Wednesday after Russia called up 300,000 reservists to add to forces fighting against Ukraine.

The wheat ETF is higher by about 0.8% while the corn ETF is adding about 0.4%.

December wheat contracts reached a high of $9.195 per bushel earlier, the highest since July 11, while December corn hit $6.985 (only a nine-day high).

— Scott Schnipper, Gina Francolla

These are some of the stocks making big moves in the premarket:

Stitch Fix — Stitch Fix's stock slid 5.9% in premarket trading after reporting a wider-than-expected quarterly loss and issuing a weak forecast. The online clothing styling company expects sales to fall over the short term as the number of active customers declines.

Beyond Meat – Beyond Meat suspended Chief Operating Officer Doug Ramsey after he was involved in a physical altercation over the weekend which resulted in third-degree battery and terroristic threatening charges. Beyond Meat fell 1.1% in premarket trading on top of a 6% slide Tuesday.

Aurora Cannabis – Aurora Cannabis lost 2.1% in the premarket after reporting a breakeven quarter, on an adjusted basis, surprising analysts who predicted a quarterly loss. The Canada-based cannabis producer saw overall revenue come in slightly below expectations.

Read the full list of stocks moving in premarket action here.

— Peter Schacknow, Samantha Subin

The dollar index, which has been on a tear in recent weeks, notched a fresh high of 110.869 on Wednesday.

That marked the index's highest level since June 2002, when it hit a high of 110.87.

Meanwhile, the euro hit a low of 0.9883 against the dollar and its lowest level since Sep. 7. The pound touched a fresh low against the dollar dating back to March 18, 1985.

The dollar also hit its highest level against the Swedish krona since July 2001.

— Samantha Subin, Gina Francolla

Shares of General Mills rose 2.5% in premarket trading after the consumer food maker topped earnings estimates and upped its outlook for the full year.

The company posted adjusted earnings of $1.11 per share on revenue of $4.72 billion. Analysts surveyed by Refinitiv had anticipated earnings of $1 a share on $4.72 billion in revenue.

General Mills' stock is trading up 12% this year and sits about 4% off its highs.

— Samantha Subin

Defense stock moved about 2% higher on Wednesday amid news that Russian President Vladimir Putin has ordered the partial mobilization of the Russian population.

As part of the mandate, Russia will order military reservists into active service. Putin has also called for more funding to increase weapons production.

Defense stocks rose in premarket trading following the news, with shares of Lockheed Martin, Raytheon Technologies and Northrop Grumman up about 2% each.

Oil prices also jumped amid the news, fueling more uncertainty in the already volatile energy market. U.S. West Texas Intermediate crude was last trading at $86.14 a barrel, up $2.20, or 2.62%. Brent crude futures added $2.28, or 2.52%, to $92.90.

— Samantha Subin, Holly Ellyatt

Goldman Sachs upgraded Estee Lauder to buy from neutral, citing the potential for robust growth going forward as China-related headwinds dissipate.

"While we see near-term challenges in Hainan owing to China's zero-covid policy and uncertainty around potential lockdowns, we believe it will prove transitory as there are several structural factors in play which can drive sustained Hainan growth going forward even when international travel resumes," analyst Jason English said.

Estee Lauder shares rose more than 1% in the premarket.

CNBC Pro subscribers can read more here.

— Alex Harring

European markets were cautiously higher on Wednesday as investors in the region braced themselves for another aggressive interest rate move from the U.S. Federal Reserve.

The pan-European Stoxx 600 nudged 0.3% higher by mid-morning, having recouped opening losses of around 0.4%. Travel and leisure stocks fell 1.8% while oil and gas stocks jumped 2.9%.

- Elliot Smith

Oil futures rose 3% after Russia's president, Vladimir Putin, said there would be a partial military mobilization in the country.

Brent crude futures rose 3.07% to $93.40 per barrel, and West Texas Intermediate futures added 3.13% to $86.57 per barrel.

— Abigail Ng

Russian President Vladimir Putin on Wednesday announced a partial military mobilization in Russia, putting the country's people and economy on a wartime footing as Moscow's invasion of Ukraine continues.

In a rare pre-recorded televised announcement, Putin said the West "wants to destroy our country" and claimed the West had tried to "turn Ukraine's people into cannon fodder," in comments translated by Reuters.

Putin said "mobilization events" would begin Wednesday without providing many further details, aside from saying that he had ordered an increase in funding to boost Russia's weapons production.

Read more here.

- Holly Ellyatt

The German government on Wednesday agreed to the nationalization of utility Uniper as it strives to keep the industry afloat in the wake of a worldwide energy crisis.

Having already accepted in July to bail out the major gas importer with a 15 billion euro ($14.95 billion) rescue deal, the state will now buy out the 56% stake of Finland's Fortum for a 0.5 billion euros. The German state is set to own around 98.5% of Uniper.

"Since the stabilisation package for Uniper was agreed in July, Uniper's situation has further deteriorated rapidly and significantly; as such, new measures to resolve the situation have been agreed," Fortum announced in a statement on Wednesday morning.

Read more here.

- Elliot Smith

As interest in battery stocks picks up after a tough year so far, CNBC Pro analyzed a number of stocks in the sector that analysts say have serious potential.

CNBC Pro screened the Global X Lithium & Battery Tech ETF on FactSet for stocks that could outperform. One stock that made the list has jumped over 40% this year so far, and analysts say it has further upside of more than 70%.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Even though the Federal Reserve is set to deliver its third consecutive 0.75 percentage point rate hike this week - tripling the pace of tightening - they should be careful not to throw the economy into a recession, said Ron Temple, head of U.S. Equity at Lazard Asset Management.

"Inflation is unacceptably high, and investors, politicians, and consumers are anxious, but patience is a virtue," said Temple. "Monetary policy works with long and variable lags."

He added that key drivers of inflation are already falling.

"The Fed should avoid the temptation to overreact to recent data and keep their eyes on the goal of achieving the softest landing possible," he said.

—Carmen Reinicke

Shares of Stitch Fix fell about 1.5% in post-market trading. The online styling company reported revenue losses in the fourth quarter after the bell Tuesday.

Stitch Fix reported a loss of 89 cents per share on a net revenue of $481.9 million, which is down 16% from the same period a year ago. Net revenue for the first quarter of 2023 is expected to be down approximately 20% from the same quarter a year prior, the company said in a release detailing its performance.

"Today's macroeconomic environment and its impact on retail spending has been a challenge to navigate, but we remain committed to working through our transformation and returning to profitability," said CEO Elizabeth Spaulding.

Full-year revenue was down 1.4% compared to the prior year.

— Alex Harring

Stock futures opened flat Tuesday evening as Wall Street awaits the Federal Reserve Open Market Committee's interest rate decision Wednesday. The central bank is expected to deliver another 0.75 percentage point interest rate hike to calm inflation.

Dow Jones Industrial Average futures rose by 20 points, or 0.06%. S&P 500 and Nasdaq 100 futures climbed 0.10% and 0.15%, respectively.

—Carmen Reinicke