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Treasury yields pare earlier drop after Fed Chief Powell

speaks

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Concerns about Middle East persist

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Iran leader rejects Trump's demand for surrender

(Updates to close)

By Caroline Valetkevitch

NEW YORK, June 18 (Reuters) -

The S&P 500 ended flat on Wednesday after a volatile session

in which the U.S. central bank left interest rates unchanged as

expected, and Federal Reserve Chair Jerome Powell said monetary

policy still needs to impose some restraint on the economy.

Powell said that Fed policy makers expect inflation in

goods prices to go up over the course of the summer as the

impact of President Donald Trump's tariffs work their way to

U.S. consumers.

Earlier, the Fed statement signaled borrowing costs were

still likely to fall this year, but slowed the overall pace of

expected future rate cuts.

While policymakers

still anticipate

cutting rates by half a percentage point this year, they

slightly slowed the expected pace from there to a single

quarter-percentage-point cut in each of 2026 and 2027.

After Powell spoke, U.S. Treasury yields pared most of

their earlier drop.

"The market might be taking its cue from the fact yields

have turned around. (Powell) made it quite clear he's not going

to change monetary policy until they are sure of the tariffs'

effect on inflation, and he stressed that many times," said

Peter Cardillo, chief market economist at Spartan Capital

Securities.

Investors also have been closely watching developments in

the Middle East, with some concerned about the possibility of a

more direct U.S. military involvement in the Israel-Iran aerial

war.

Iranian Supreme Leader Ayatollah Ali Khamenei

rejected

Trump's demand for unconditional surrender. Trump said his

patience had run out, though he gave no clue about what his next

step would be.

According to preliminary data, the S&P 500

lost 2.37 points, or 0.04%, to end at 5,980.35 points,

while the Nasdaq Composite gained 23.66 points, or

0.12%, to 19,544.75. The Dow Jones Industrial Average

fell 43.83 points, or 0.10%, to 42,171.97.

Stocks were solidly higher before the Fed statement.

Earlier in the day, initial

jobless claims data showed the number of Americans filing

new applications for unemployment benefits fell last week, but

stayed at levels consistent with a further loss of labor market

momentum in June.

(Additional reporting by Kanchana Chakravarty and Sukriti Gupta

in Bengaluru; Editing by Shinjini Ganguli and David Gregorio)