Market Volatility Continues as Fed Holds Interest Rates Steady
The tech-heavy Nasdaq Composite led markets lower on Wednesday, with a 0.5% decline, as the broader mood remained muted following the Federal Reserve’s latest interest rate decision. The S&P 500 and Dow Jones Industrial Average also fell, by 0.5% and 0.3%, respectively.
Fed Removes Language on Inflation Progress
In its statement, the Federal Reserve removed language indicating that it was making progress towards its goal of 2% inflation, stating simply that “inflation remains somewhat elevated.” Fed Chair Jerome Powell downplayed the change, calling it “language cleanup” rather than a signal.
Tech Stocks Under Pressure
Nvidia was again pressuring the tech sector, with its stock falling more than 4% after a report said the Trump administration was weighing additional curbs on exports of its chips. Meanwhile, IBM shares surged over 11% in after-hours trading after the company’s full-year revenue forecast came in above estimates, driven by an increase in AI bookings.
Earnings Season Continues
After the close, attention turned to Meta and Microsoft’s quarterly results, with investors seeking reassurance that Big Tech’s heavy AI spending will pay off in growth. Tesla rounds out Wednesday’s megacap earnings, with Wall Street watching for a new catalyst to jump-start the stock.
Fed Chair Powell on Crypto and Inflation
Powell said the Fed’s role with crypto is to look at the banks, noting that it’s “not against innovation.” He also emphasized that the labor market seems stable and broadly in balance, citing moderating shelter inflation as “further progress” towards the Fed’s 2% goal.
Economic Forecasts Remain Uncertain
Economists are cautious about the inflationary impact of tariffs, which could impact the Fed’s path forward. Powell acknowledged that economic forecasts are always uncertain, but this time feels different with questions about President Trump’s policies swirling.
Market Reaction
Markets initially reacted negatively to the Fed’s statement, with stocks moving to session lows. However, Powell’s comments later helped to bounce off those lows. The Federal Reserve held interest rates steady, as widely expected, but removed one key phrase in its statement that could point to the central bank leaning more hawkish than it has been in prior meetings.
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