US stocks closed higher on Wednesday as investors assessed the Federal Reserve’s decision to keep interest rates unchanged and the ongoing trade dynamics between the US and China. The benchmark S&P 500 rose 0.4%, while the tech-heavy Nasdaq Composite gained 0.3%. The Dow Jones Industrial Average increased by 0.7%, or nearly 300 points.
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Last Wednesday afternoon, the Federal Reserve left interest rates unchanged at a range of 4.25% to 4.5% for the third consecutive meeting. The central bank also noted in its statement that “the risks of higher unemployment and higher inflation had risen.
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Federal Reserve Chair Jerome Powell reiterated that the central bank does not need to be in a “hurry” to cut interest rates and suggested a “wait and see” approach to the economic impacts of tariffs. “My gut tells me that uncertainty about the economy’s path is extremely elevated and that the downside risks have increased,” Powell said.
He emphasized potential scenarios for and against cutting rates this year, highlighting the current economic unpredictability. Markets responded positively to recent news about upcoming trade discussions between top US and Chinese officials. This weekend’s meeting marks the first high-level trade talks since President Trump increased tariffs on Chinese imports to 145% in April.
While faith remains that a trade agreement can be reached, expectations for the Geneva meeting remain tempered.
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Fed holds rates amid trade optimism
In a related press conference, President Trump was asked if he would consider lowering tariffs on China to foster more productive negotiations.
His response was a blunt, “No.”
In corporate news, Nvidia’s stock rose 3% following reports that the Trump administration is looking to repeal AI chip export restrictions put into place under former President Joe Biden. This move is part of Trump’s efforts to revoke the AI Diffusion rule set by Biden in January. Additionally, shares of Starz and Lions Gate surged by roughly 45% and 23%, respectively, after completing their long-awaited breakup.
Lions Gate Entertainment Corp. announced the finalization of the separation earlier Wednesday. Starz trades under the Nasdaq ticker “STRZ” and Lions Gate trades under the symbol “LION” on the New York Stock Exchange. Federal Reserve Chair Jerome Powell’s press conference further emphasized the uncertainty surrounding the economic outlook.
Powell noted that the Fed is not equipped to address supply chain disruptions, stressing that the administration and the private sector must better handle such issues. Despite rising public concern over inflation and tariffs, Powell mentioned little evidence of a major economic impact. He noted that the Fed’s current policy is well-positioned, with strong job creation and low unemployment indicating that the broader economy remains in “solid shape.
In conclusion, while recent economic data and market sentiment present a mixed picture, the Federal Reserve’s cautious stance and ongoing trade negotiations will likely influence market behavior in the coming weeks.
