U.S. stocks ended sharply lower on Wednesday after the Federal Reserve kept interest rates unchanged, raising fears that the central bank could face major challenges in taming sky-high inflation. Also, AI-related semiconductor stocks continued their decline ahead of quarterly results from a batch of big tech companies. All three major indexes ended in negative territory.
How Did the Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 2.2%, or 1,153.18 points, to end at 51,594.14 points, recording its worst day since April 2025.
The S&P 500 declined 1.5%, to close at 7,316.15 points. Industrials and tech stocks were the worst performers, while energy stocks were the biggest gainers.
The Information Technology Select Sector SPDR (XLK) shed 2.6%, while the Industrials Select Sector SPDR (XLI) lost 3.2%. The Energy Select Sector SPDR (XLE) gained 1.9%. Nine of the 11 sectors of the benchmark index ended in negative territory.
The tech-heavy Nasdaq slid 1.7% to finish at 24,442.94 points.
The fear gauge, the CBOE Volatility Index (VIX), was up 13.45% to 20.66. Decliners outnumbered advancers on the S&P 500 by a 1.8-to-1 ratio. A total of 17.7 billion shares were traded on Wednesday, higher than the last 20-session average of 17.3 billion.
On the S&P 500, there were 32 new 52-week highs and four new lows. On the Nasdaq, there were 121 new highs and 230 new lows.
Fed Leaves Interest Rates Unaltered
The Federal Reserve left interest rates unaltered in its current range of 3.5-3.75%, at the end of its two-day policy meeting on Wednesday. The move was opposed by three of the 12 members of its policy-setting Federal Open Market Committee, who wanted a 25-basis-point hike.
The decision was highly anticipated, but a sharp rise in bond yields signaled that the Federal Reserve could lose out in its fight to tame inflation. The 10-year Treasury yield rose 7 basis points to surpass 4.67%, while the 30-year Treasury yield jumped 10 basis points to settle above 5.2%.
Inflation has been sharply above the Fed’s 2% target over the past five years now. Although it eased last year, geopolitical tensions involving the United States and Iran saw inflation spike in recent months, making it difficult for the Fed to bring it down.
Investors believe that inflation could spike further if the hostilities between the United States and Iran continue for a longer period.
Meanwhile, AI-related chip stocks continued to bleed, with the PHLX Semiconductor (SOX) ending 5.3% lower, recording its fifth consecutive session of losses. Shares of Micron Technology, Inc (MU) tumbled 9.9%. Micron Technology has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
