Late trading: Inflation pressures increase, the Federal Reserve holds steady, and the Dow drops 500 points.

On March 19, Beijing time, U.S. stocks continued to decline towards the end of trading on Wednesday, with the Dow dropping 500 points. Key inflation data exceeded expectations, and the Federal Reserve kept the benchmark interest rate unchanged.

The Dow fell by 500.85 points, a decrease of 1.07%, closing at 46,492.41 points; the Nasdaq dropped by 182.45 points, a decline of 0.81%, finishing at 22,297.08 points; the S&P 500 index fell by 52.83 points, a decrease of 0.79%, ending at 6,663.26 points.

The Federal Reserve maintained the federal funds rate in the range of 3.5% to 3.75% and stated in its post-meeting announcement that “the impact of developments in the Middle East on the U.S. economy remains uncertain.” However, the central bank hinted that it still expects a rate cut later this year.

Earlier on Wednesday, the producer price index—an indicator that measures changes in wholesale prices—rose by 0.7% month-over-month in February, well above the 0.3% expected by economists surveyed by Dow Jones. This report indicated that inflation was already in an unstable state before the outbreak of war in Iran—a situation that heightened concerns about stagflation driven by rising oil prices.

“This higher-than-expected number is related to tariffs,” said Todd Schoenberger, Chief Investment Officer at CrossCheck Management, pointing out that costs for metals, industrial inputs, and manufacturing are all rising. “This is structural inflation, not temporary, and it is likely to affect monetary policy until the end of the third quarter.”

“Coupled with the rising energy prices we’ve seen since the start of the war in Iran (which have not yet been reflected in these reports), Wall Street is preparing for rapidly increasing prices that will clearly pass through to consumers,” Schoenberger continued.

International benchmark Brent crude futures rose by 3%, reaching $107 per barrel. U.S. oil prices declined but remained elevated, with West Texas Intermediate crude futures at $96 per barrel.

The market continues to monitor the latest developments in the Middle East. Reports indicate that Israel has attacked Iran’s largest gas processing facility located in Bushehr Province. Iran has also threatened to attack oil facilities in Saudi Arabia, the United Arab Emirates, and Qatar. The country has already launched a new wave of attacks on the UAE’s energy infrastructure this week, raising concerns about crude oil and fuel transportation.

“It’s clear that the market is pricing this conflict as temporary,” said Tim Urbano, Chief Investment Strategist at Innovator Capital Management. “We believe this is also our baseline scenario assumption. But we want to remain cautious because the longer oil prices stay at elevated levels, the greater the likelihood that inflation becomes stubborn.”

U.S. President Trump has waived the U.S. shipping law known as the Jones Act for 60 days in an effort to stabilize oil prices. White House Press Secretary Carolyn Levitt stated in a release that temporarily suspending the act “will allow critical resources such as oil, gas, fertilizers, and coal to flow freely to U.S. ports for 60 days.”

Oil prices rose the day before after Trump posted on Truth Social that the U.S. does not need help from NATO allies in the Middle East. Earlier this week, the President hinted at the possibility of forming a coalition to help protect ships trying to pass through the Strait of Hormuz, although some countries were “less enthusiastic” about this.

“Given the higher uncertainty today, I think we are in a more volatile environment,” said Anshul Sharma, Chief Investment Officer at Savvy Wealth.

“If oil prices remain elevated here… we know this will permeate into the economy,” he added. “This will make it more difficult for the Federal Reserve to balance its responsibilities.”