Mumbai, June 18 -- U.S. stocks slumped Wednesday on speculation the Federal Reserve may hike interest rates this year to keep a lid on inflation. Higher rates can tap the brakes on accelerating prices at cash registers but they also slow the economy and hurt prices for investments.

The S&P 500 dropped 1.2% and erased an earlier, modest gain after the Fed released projections showing that nine of 18 policymakers foresee at least one increase to its main interest rate this year. The Dow Jones Industrial Average went from a gain of 280 points in the morning to a drop of 507 points (1%) while the Nasdaq composite sank 1.3%.

Oil prices were steadier Wednesday following slides earlier in the week on optimism about the tentative U.S.-Iran deal...