Dow Jones, major indices rise as Fed holds rates steady, Powell warns of trade and inflation risks
U.S. stocks closed higher Wednesday after the Federal Reserve kept interest rates unchanged and Chair Jerome Powell acknowledged growing uncertainty surrounding the economic outlook.
The S&P 500 edged up 0.43%, while the Nasdaq Composite rose 0.27% and the Dow Jones Industrial Average added 284 points, or 0.7%.
Disney helped lift the Dow after reporting better-than-expected earnings and a surprise jump in Disney+ streaming subscribers.
As expected, the Fed left its benchmark interest rate unchanged at a range of 4.25%-4.5%, where it has been since December.
However, the tone of the post-meeting statement and Powell’s press conference pointed to growing concerns that inflation could remain sticky while the economy slows.
“The Committee is attentive to the risks to both sides of its dual mandate,” the Fed said in its statement, adding that “the risks of higher unemployment and higher inflation have risen.”
Powell echoed those concerns, saying, “My gut tells me that uncertainty about the economy is extremely elevated,” though he emphasized that the negative outcomes had not yet materialized.
Trade policies
The Fed’s cautious stance comes as the Trump administration doubles down on protectionist trade policies.
On Wednesday, former President Donald Trump told reporters he would not reduce tariffs on Chinese imports ahead of upcoming U.S.-China trade talks in Switzerland.
“Large increases in tariffs could lead to a slowdown in growth, an uptick in long-term inflation, and an increase in unemployment,” Powell said.
Markets also reacted to a Bloomberg report that Trump’s team may lift Biden-era restrictions on AI chip exports, which boosted Nvidia shares by about 2%.
However, Apple and Alphabet weighed on the Nasdaq, with Alphabet sliding roughly 8% after a report suggested Apple may end its default search engine partnership with Google in Safari, opting instead for its own AI-powered search tools.
