Dow Jones and Major Indices Rise as Fed Keeps Rates Steady; Powell Emphasizes Trade and Inflation Risks

U.S. stocks experienced gains on Wednesday after the Federal Reserve opted to keep interest rates steady, with Chair Jerome Powell acknowledging the growing uncertainty surrounding the economic outlook.

The S&P 500 grew by 0.43%, the Nasdaq Composite saw an increase of 0.27%, and the Dow Jones Industrial Average rose by 284 points, equivalent to 0.7%.

Disney’s surprisingly strong earnings report and an unforeseen uptick in Disney+ subscribers played a significant role in uplifting the Dow.

As expected, the Fed decided to maintain its benchmark interest rate at 4.25%-4.5%, a level unchanged since December.

However, the tone in the post-meeting statement and Powell’s press conference raised concerns that inflation could linger despite a slowing economy.

“The Committee remains vigilant regarding risks that could impact both sides of its dual mandate,” the Fed indicated, remarking that “the threats of rising unemployment and sustained inflation have become more pronounced.”

Powell echoed these sentiments, stating, “My instinct tells me that uncertainty about the economy is incredibly high,” although he noted that adverse outcomes have not yet been realized.

Trade Policies

The Fed’s cautious stance aligns with the Trump administration’s focus on protectionist trade measures.

On Wednesday, former President Donald Trump informed the press that he would not be lowering tariffs on Chinese imports ahead of the forthcoming U.S.-China trade talks in Switzerland.

“Marked increases in tariffs could lead to a slowdown in growth, a rise in long-term inflation, and an uptick in unemployment,” Powell commented.

Markets also reacted to a Bloomberg report suggesting that Trump’s administration might lift Biden-era restrictions on AI chip exports, resulting in a 2% rise in Nvidia shares.

Conversely, Apple and Alphabet negatively affected the Nasdaq, with Alphabet declining nearly 8% after reports indicated that Apple might end its default search engine agreement with Google in Safari, opting instead for its own AI-enhanced search tools.