Stock market US stocks
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. Image Credit: Reuters

New York: US Stocks saw wild swings, with traders overwhelmed by the many headlines that followed the Federal Reserve decision and Jerome Powell's remarks and ended up signaling at least one thing: policy will remain aggressively tight — making the odds of a soft landing look increasingly elusive.

The Dow Jones Industrial Average finished down 1.7 percent at 30,183.78.

The broad-based S&P 500 also shed 1.7 percent to 3,789.93, while the tech-rich Nasdaq Composite Index declined 1.8 percent to 11,220.19.

The gauge whipsawed in the aftermath of the Fed announcement, climbing as much as 1.3% at one point.

The US central bank announced its third consecutive interest rate increase of 0.75 percentage point, continuing the forceful action to tamp down inflation that has surged to the highest in 40 years.

5th policy rate increase in 2022

The increase —  the fifth one this year — takes the policy rate to 3.0-3.25 percent.

Markets were expecting another big interest rate increase, but were caught off guard by the Fed's outlook as far as the need for additional hikes.

"The higher-for-longer narrative kicked in," Art Hogan, analyst of B. Riley Wealth Management, said of the market's reaction to an announcement that was more "hawkish" than expected.

The two-year rate topped 4%, piercing that mark for the first time since 2007. The dollar rallied.

More hikes expected

Fed Chair Jerome Powell said officials were "strongly committed" to curbing inflation after they raised interest rates by 75 basis points for a third straight time and signaled more hikes to come.

Powell said his main message was that officials were "strongly resolved" to bring inflation down to the Fed's 2% goal and added that "we will keep at it until the job is done."

The phrase invoked the title of former Fed chief Paul Volcker's memoir "Keeping at It."

"Jerome Powell almost channeled his inner Paul Volcker today, talking about the forceful and rapid steps the Fed has taken, and is likely to continue taking, as it attempts to stamp out painful inflation pressures and ward off an even worse scenario later down the line," said Seema Shah, chief global strategist at Principal Global Investors. "With the new rate projections, the Fed is engineering a hard landing — a soft landing is almost out of the question."

Officials forecast that rates would reach 4.4% by the end of this year and 4.6% in 2023, a more hawkish shift in their so-called dot plot than expected.

That implies a fourth-straight 75-basis-point hike could be on the table for the next gathering in November — about a week before the US midterm elections.