Fed Chair Kevin Warsh's Hawkish Stance Lifts Dollar, Squeezes Stocks

Federal Reserve Chair Kevin Warsh held the policy rate unchanged at 3.50%‑3.75% in his first meeting but signaled a more hawkish outlook, with almost half of policymakers now expecting at least one rate increase before year‑end. The tone boosted the US dollar, which rose to a one‑year high of 100.71 on the Dollar Index and pushed the euro, pound and yen to multi‑month lows.

The shift also pressured equity markets. The Dow fell 0.98%, the S&P 500 slipped 1.21% and the Nasdaq dropped 1.34% as investors priced in higher‑rate expectations. Technology giants Microsoft, Meta, Alphabet and Amazon all closed lower, and SpaceX recorded its first post‑IPO decline. Treasury yields jumped, with the two‑year yield rising more than 16 basis points to 4.216%.

Analysts linked the market reaction to the Fed’s more aggressive dot‑plot and emphasized that higher rates could benefit large banks but increase borrowing costs and volatility across stocks and commodities.