The S&P 500 fell on Wednesday, snapping back from earlier gains after the Federal Reserve delivered its first interest rate hike since July 2023, with Chair Powell signaling a hawkish stance that rattled investors.

The benchmark index closed 0.5% lower after dipping as much as 1% during the session, while the tech-heavy Nasdaq 100 finished nearly flat after briefly surging 1% earlier in the day. Powell, in his post-decision press conference, described the move as "removing some degree of accommodation," a comment that markets interpreted as a sign that further tightening could be on the horizon.

The pullback trimmed the S&P 500's year-to-date advance to 10%, with energy stocks leading the decline and posting their worst single-day performance since June.

Daniel Siluk, portfolio manager at Janus Henderson Investors, noted a subtle but significant shift in the Fed's language: "The committee removed the reference to inflation being driven by supply shocks, which signals policymakers are increasingly focused on broader and more persistent price pressures rather than viewing the recent uptick as mostly transitory or externally driven."

Wednesday's hike may not be a one-off move. Both Fed officials and market participants now anticipate at least one more rate increase within the year. "History is pretty clear that once the Fed starts hiking, it usually does so multiple times," said Chris Zaccarelli, chief investment officer at Northlight Asset Management. "But whether those moves come in consecutive meetings or with pauses in between is far less predictable."

Rate-sensitive sectors bore the brunt of the selloff following the Fed's announcement, with the S&P Supercomposite Homebuilding Index dropping 1.4%.

At the closing bell, the S&P 500 stood at 7,551.81, down 0.5%, while the Dow Jones Industrial Average fell 1.2% to 51,461.90. The Nasdaq Composite finished roughly flat at 25,978.43, and the Nasdaq 100 was little changed at 28,945.06. The small-cap Russell 2000 slipped 0.4% to 2,858.811.