Market Volatility Continues as Fed Holds Interest Rates Steady
The tech-heavy Nasdaq Composite fell over 0.6% on Wednesday, retracing some of its bounce-back rally from the previous day. The S&P 500 and Dow Jones Industrial Average also declined, losing nearly 0.5% and 0.2%, respectively. The Federal Reserve’s decision to keep interest rates unchanged in a range of 4.25%-4.5% contributed to the market’s muted mood.
Fed Chair Powell Downplays Inflation Concerns
In a press conference, Fed Chair Jerome Powell pushed back against concerns that the central bank’s language change on inflation signaled a lack of confidence in its progress towards the 2% goal. Powell referred to the change as “language cleanup” rather than a signal, which helped markets bounce off their lows. The Fed’s statement noted that inflation remains somewhat elevated, but Powell cited moderating shelter inflation as “further progress” towards the 2% goal.
Nvidia Stock Falls Amid Reports of Trump Administration’s Curbs on Chip Exports
Nvidia’s stock fell over 6% on Wednesday after a report from Bloomberg said the Trump administration was weighing additional curbs on exports of its chips to China. This news comes amid a volatile week for Nvidia stock, which saw its worst one-day market cap loss in history on Monday.
AI Model DeepSeek Continues to Rattle Markets
The saga surrounding DeepSeek, a Chinese startup challenging assumptions about AI spending and costs, continued to unfold. Alibaba’s stock rose over 4% after the company released a new AI model that it claimed is better than DeepSeek’s rival to ChatGPT. Microsoft-backed OpenAI also accused DeepSeek of using its proprietary models to train its competitor.
Earnings Season Kicks Off with Meta, Microsoft, and Tesla
Investors are bracing for a busy earnings season, with Meta, Microsoft, and Tesla set to report their quarterly results after the bell on Wednesday. The reports will provide insight into the impact of AI on Big Tech’s heavy spending and growth prospects.
Fed’s Role in Crypto Regulation
Powell emphasized that the Fed’s role in crypto regulation is to ensure that banks understand and manage the risks associated with serving crypto customers. He noted that banks are perfectly able to serve crypto customers as long as they understand and manage the risks, and that the Fed is not against innovation in the space.
Uncertainty Surrounds Trump’s Policies
Powell acknowledged that there is elevated uncertainty surrounding President Trump’s policies, particularly in areas such as tariffs, immigration, fiscal policy, and regulatory policy. However, he expressed confidence that the Fed will continue to do its work despite the uncertainty.
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