Stock futures opened lower Wednesday evening as investors contemplated the Federal Reserve's latest monetary policy decision and updated projections, which signaled a quicker path to higher interest rates than previously anticipated. Contracts on the S&P 500, Dow and Nasdaq added to earlier losses.

Each of the three major stock indexes ended Wednesday's session lower after the Fed's new projections pointed to two rate hikes by year-end 2023. Federal Open Market Committee members also upgraded their forecasts for economic growth and inflation, affirming market participants' concerns over sustainably higher prices. While the Fed left rates on hold at the conclusion of this month's meeting and kept the pace of asset purchases unchanged, market participants are now gearing up for a potentially less accommodative tilt to Fed policy. 

"There was a more hawkish tone from the Federal Reserve, mostly coming from the Committee but [Fed Chair Jerome] Powell also offered an upbeat assessment of the economy with small steps toward the exit," Michelle Meyer, Bank of America U.S. Economist, said in a note Wednesday. "The big surprise came from the dots where the median expectation is now for 2 hikes in 2023 with only 2 dots away from 2022 also showing a hike." 

"While Fed officials are talking about 'transitory' inflation, some clearly believe in greater persistence, which was reflected in upside risks to the PCE [personal consumption expenditures outlook] in the SEP [summary of economic projections]," she added. 

On the other hand, however, the Fed also acknowledged that the labor force could be under pressure for some time, given the considerable difficulties the economy has had in recovering all of the jobs lost during the pandemic even as more reopenings take place. Powell said during his press conference Wednesday that the economy ultimately remained "a ways off" from reaching "substantial further progress" toward the Fed's goal of maximum employment that would signal a start to tapering. 

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But much of the employment data has been trending in the right direction, albeit with some moderation in the rate of improvements, and some lingering concerns over labor supply shortages. The Labor Department's weekly jobless claims report Thursday morning is expected to show a seventh consecutive decline in initial unemployment filings to a new pandemic-era low. 

"Even with the eventual tapering of asset purchases, and subsequent moderate increase in interest rates, we think it’s clear that the backdrop for the economy will generate significant employment improvement," Rick Rieder, BlackRock's chief investment officer of global fixed income, said in an email. 

6:01 p.m. ET Wednesday: Stock futures fall, extending earlier declines

Here's where markets were trading Wednesday evening: 

  • S&P 500 futures (ES=F): 4,213.75, -9.25 points (-0.22%)

  • Dow futures (YM=F): 33,951.00, -66 points (-0.19%)

  • Nasdaq futures (NQ=F): 13,947.25, -34 points (-0.24%)

NEW YORK , NY – JUNE 02: Exterior view of the New York Stock Exchange and Wall St. as new company Organon start trading next thursday in New York on June 02 2021. Organon look to expand to provide treatments for other conditions unique to women, about 80% of the new company’s revenues will come from outside the U.S (Photo by Kena Betancur/VIEWpress)

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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