* Indexes fall: Dow 0.98%, S&P 500 1.21%, Nasdaq 1.34%

* All S&P 500 industry sectors turn red after Fed meeting

* Fed keeps rates steady, signals hikes later this year

* Regional banks, housing ETF underperform after meeting

(Updates with final closing prices, trading volume)

By Sinéad Carew and Sruthi Shankar

June 17 (Reuters) - The S&P 500 and Nasdaq closed down by

more than 1% on Wednesday, as traders bet that the Federal

Reserve's next move would be a rate hike after new Fed Chair

Kevin Warsh highlighted the need to tame inflation and other

policy makers projected rising interest rates later this year.

The Fed left rates unchanged as expected, but new quarterly

projections showed nine central bank officials expect at least

one rate hike by the end of 2026 to combat higher inflation. The

policy statement removed previous language that had flagged the

likelihood for rate cuts this year.

In his first meeting as Fed Chair, Warsh told reporters the

central bank would deliver on price stability. Breaking with

past practices by Fed chiefs, Warsh did not submit an

interest-rate-path projection as part of quarterly forecasts.

Policymakers had been widely expected to hold interest rates

unchanged at the 3.50%-3.75% range as they wrestled with

inflation pressures from the oil-price spike during the Iran

war.

After the meeting, short-term U.S. interest-rate futures

were pricing in a bigger chance that the Federal Reserve will

deliver a rate hike as soon as September than opt to keep rates

where they are, according to CME Group's ( CME ) FedWatch tool. Bets

that rates would hold steady by year-end were around 13% versus

40% on Tuesday.

"There was clearly a hawkish tilt to the Fed's statement and

Chair Warsh's comments at the press conference. The main

takeaway, in my opinion, is the Fed's focus on the commitment to

deliver price stability and the commentary about inflation,"

said Michael James, managing director and equity sales trader at

Rosenblatt Securities.

Warsh also talked about a "new chapter" for the Fed and

announced a wide-ranging project to review key aspects of

central bank policy making. He said he would like financial

markets to price securities based on their own reading of

economic data rather than trying to price for what they think

central bank officials think.

The Dow Jones Industrial Average fell 507.12 points,

or 0.98%, to 51,492.55 after two straight sessions of

record-high closing levels. The S&P 500 lost 91.25

points, or 1.21%, to 7,420.10 and the Nasdaq Composite

lost 354.69 points, or 1.34%, to 26,021.66.

All of the S&P 500's 11 major industry indexes closed lower

after the meeting. Communications services was the

leading laggard with a roughly 3% loss. The top performer was

industrials, which finished down 0.1%. Regional banks

underperformed large banks with the KBW Regional Banking index

finishing down 1.8% compared with a 0.2% drop for the S&P

500 bank index.

Rosenblatt's James noted that regional banks would be hurt

more by higher rates. He also pointed to a 2.3% decline in the

State Street SPDR S&P 500 homebuilders ETF as higher

rates also tend to put pressure on housing.

The Cboe volatility index finished up 2 points at

18.44 for its biggest one-day increase in four days.

Stock moves had been muted ahead of the Fed meeting. Wall

Street's main indexes had rallied sharply from Thursday through

Monday as oil prices fell after President Donald Trump announced

a preliminary U.S.-Iran peace deal. Oil prices edged back up on

Wednesday after Trump said the agreement with Iran was not final

and that the war could resume if he is unsatisfied.

Earlier in the day, economic data showed U.S. retail sales

increased more than expected in May, with households purchasing

more cars and other vehicles even as they paid higher prices for

gasoline.

In individual stocks, shares of Elon Musk's SpaceX

closed down 4.9%, in the space and AI company's first decline

since its market debut on Friday.

CME Group ( CME ) slipped 3.5% after the exchange operator

said its CEO, Terry Duffy, will step down on March 1, and

transition to the role of executive chairman.

Shares of Allbirds ( BIRD ) soared 39% after the footwear

maker-turned-AI company changed its name to Smartbird and

appointed former Amazon executive Nadia Carlsten as

CEO.

Declining issues outnumbered advancers by a 2.62-to-1 ratio

on the NYSE, where there were 282 new highs and 131 new lows. On

the Nasdaq, 1,778 stocks rose and 3,131 fell as declining issues

outnumbered advancers by a 1.76-to-1 ratio.

The S&P 500 posted 27 new 52-week highs and 18 new lows

while the Nasdaq Composite recorded 86 new highs and 117 new

lows.

On U.S. exchanges, 23.66 billion shares changed hands

compared with the 21.07 billion average for the last 20

sessions.