Wall Street stocks tumbled into the red on Wednesday after the Federal Reserve unveiled a ninth straight interest rate hike despite worries surrounding the banking sector.

The US central bank raised the benchmark lending rate by a quarter-point, underscoring its determination to tackle stubborn inflation.

But policymakers are also trying to avoid further upheaval in the commercial banking sector, following the swift collapse of Silicon Valley Bank and fears of contagion.

The Dow Jones ended 1.6 percent lower at 32,030, while the S&P 500 Index plunged 1.7 percent to 3,936.

The Nasdaq fell 1.6 percent to 11,669.

Fed Chair Jerome Powell stressed in a press conference that the central bank is committed to learning the lessons from this episode of banking turmoil, while noting that financial conditions have tightened as well.

"The statement was dovish, but he did say that it's hard to judge a recession," said Peter Cardillo of Spartan Capital.

Powell also added that the Fed needs to strengthen supervision and regulation of banks.

"Anytime you put forward more regulation, it's obviously a negative in terms of stocks," Cardillo said.

Regional banking shares slipped on Wednesday as well, with the troubled First Republic Bank ending 15.5 percent lower.

PacWest Bancorp plummeted 17.1 percent while KeyCorp lost 5.6 percent. (AFP)