The Dow Jones Industrial Average closed higher after Federal Reserve Chair Jerome Powell indicated the central bank’s next move was unlikely to be a rate hike, easing investor concerns about inflation. The broader market, however, finished lower, with losses from chipmakers dragging down the S&P 500. The Dow added 87.37 points, or 0.23%, to close at 37,903.29. The S&P 500 lost 0.34% to close at 5,018.39, while the Nasdaq Composite slid 0.33% to settle at 15,605.48.
It was a volatile day for the major averages, with the Dow rallying more than 530 points at its session high, spurred by Powell’s comments. At one point, the S&P 500 was up 1.2%, while the Nasdaq climbed more than 1.7%. The central bank chose to hold rates steady, citing a “lack of further progress” in bringing inflation back down toward its 2% goal. However, Powell downplayed the likelihood of a rate hike in a press conference following the decision.
“I think it’s unlikely that the next policy rate move will be a hike,” he said. “I’d say it’s unlikely.” Investors also reacted positively to the Fed’s announcement that it would slow the pace of quantitative tightening by reducing the rate at which it allows maturing bond proceeds to roll off its balance sheet without reinvestment.
“The fact that inflation remains elevated means we’re not going to see rate cuts very soon,” said Sonu Varghese, global macro strategist at Carson Group. “At the same time, they are going to slow the pace at which they shrink their balance sheet (their massive bond portfolio), which will likely put less upward pressure on bond yields.” The 10-year Treasury yield briefly dropped below 4.6% following Powell’s comments, alleviating some investor fears that it may jump back above 5% this year and restrict economic growth.
Stocks tied to artificial intelligence struggled during Wednesday’s session, following disappointing reports from some top AI contenders. Advanced Micro Devices tumbled 8.9% after issuing an in-line current-quarter revenue forecast, while Super Micro Computer slid 14% on light revenue. Wall Street is coming off a losing month, with the S&P 500 and the Nasdaq posting losses of more than 4%. The Dow fell 5% for its worst monthly performance since September 2022.
