U.S. markets closed higher on Wednesday after the Federal Reserve held its benchmark interest rate steady and Chair Jerome Powell flagged increasing uncertainty in the economic outlook.
The Dow Jones Industrial Average gained 284 points (0.7%), while the S&P 500 rose 0.43% and the Nasdaq Composite added 0.27%. Strong earnings from Disney helped lift the Dow, with the entertainment giant surprising Wall Street by reporting higher-than-expected revenue and a jump in Disney+ subscriber growth.
Fed Keeps Rates Steady, But Tone Turns Cautious
As widely expected, the Fed maintained its target rate between 4.25% and 4.5%, which has held steady since December. However, the central bank’s post-meeting statement and Powell’s follow-up comments reflected a more cautious tone.
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“The Committee is attentive to the risks to both sides of its dual mandate,” the Fed stated. “The risks of higher unemployment and higher inflation have risen.”
Powell underscored this uncertainty, saying,
“My gut tells me that uncertainty about the economy is extremely elevated,” though he clarified that these negative scenarios have not yet materialized.
Trump’s Trade Stance Adds Complexity
The Fed’s warning comes as former President Donald Trump reinforces his protectionist trade agenda. On Wednesday, he told reporters he had no plans to reduce tariffs on Chinese imports, despite an upcoming round of U.S.-China trade talks scheduled to take place in Switzerland.
Powell addressed the potential impact of renewed trade friction, warning:
“Large increases in tariffs could lead to a slowdown in growth, an uptick in long-term inflation, and an increase in unemployment.”
Tech Stocks Diverge: Nvidia Rises, Alphabet Sinks
Markets also responded to a Bloomberg report suggesting that Trump’s team may lift Biden-era restrictions on AI chip exports. The news helped push Nvidia stock up 2%, reflecting optimism around expanded chip market access.
However, Alphabet shares plunged 8% following a report that Apple may ditch Google as the default search engine in Safari. Apple is reportedly exploring its AI-driven search tool, a shift that could significantly affect Google’s search dominance.
