On Wednesday, U.S. stocks experienced gains after the Federal Reserve opted to keep interest rates steady, with Chair Jerome Powell recognizing the growing uncertainty surrounding the economic forecast.

The S&P 500 saw an increase of 0.43%, while the Nasdaq Composite rose by 0.27%, and the Dow Jones Industrial Average added 284 points, or 0.7%.

A better-than-expected earnings report from Disney and an unexpected rise in Disney+ subscribers helped boost the Dow.

As expected, the Fed maintained its benchmark interest rate in the range of 4.25%-4.5%, unchanged since December.

Despite this, the tone conveyed in the post-meeting statement and Powell’s press conference raised concerns that inflation may persist even as the economy slows down.

“The Committee remains watchful regarding risks on both sides of its dual mandate,” noted the Fed, emphasizing that “the chances of higher unemployment and sustained inflation have increased.”

Powell echoed these concerns, stating, “My instincts tell me that uncertainty about the economy is exceedingly high,” though he also pointed out that negative outcomes have not yet emerged.

Trade Policies

The Fed’s cautious stance aligns with the Trump administration’s adherence to protectionist trade policies.

On Wednesday, former President Donald Trump told reporters that he would not reduce tariffs on Chinese imports ahead of the forthcoming U.S.-China trade discussions in Switzerland.

“Significant increases in tariffs could lead to a slowdown in growth, a rise in long-term inflation, and an uptick in unemployment,” Powell remarked.

Markets also reacted to a Bloomberg report suggesting that Trump’s team might lift Biden-era restrictions on AI chip exports, resulting in a 2% rise in Nvidia shares.

Conversely, Apple and Alphabet negatively affected the Nasdaq, with Alphabet falling approximately 8% after a report indicated that Apple might end its default search engine agreement with Google in Safari, opting for its own AI-driven search tools instead.