The stock market slid on Wednesday following the Federal Reserve’s first policy decision of the year. The S&P 500 fell by 0.47% to close at 6,039.31, the Nasdaq dropped 0.51% to end at 19,632.32, and the Dow Jones Industrial Average (DJIA) shed 136.83 points, or 0.31%, to close at 44,713.52. Nvidia shares hit their session lows after Bloomberg News reported Trump administration officials have discussed curbing chip sales of the company to China after the emergence of the DeepSeek AI model.
Shares ended the session down 4%. For the week, Nvidia is down more than 13%. The Federal Reserve left the federal funds rate in a range of 4.25% to 4.50%.
The Fed’s post-meeting statement offered a cautious view toward sticky inflation, providing an explanation for Wednesday’s interest rate pause. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid,” the statement read. “Inflation remains somewhat elevated.”
David Russell, global head of market strategy at TradeStation, commented on the decision: “The statement was a little hawkish, but policymakers are on hold with a long break until the March meeting.
Data between now and then will set the tone for that next big decision.”
During a press conference, Fed Chair Jerome Powell noted the recent stabilization in unemployment and ongoing solid labor market conditions. However, he also mentioned that inflation remains somewhat elevated. A volley of Big Tech earnings is also due Wednesday afternoon, with several companies issuing their quarterly reports.
Following Monday’s market reactions to the DeepSeek developments, UBS’ Solita Marcelli advised investors to be mindful of how they invest around artificial intelligence. Marcelli emphasized the importance of an active and diversified investment approach, particularly in the AI ecosystem. “AI is here to stay and, if anything, DeepSeek reinforces that,” Marcelli wrote to clients.
“However, the latest developments indicate that overly concentrated or passive investment strategies can be risky, as value can quickly shift within the AI landscape.”
Marcelli recommended focusing on longer-term growth areas in AI, power, and resources sectors. Monday’s technology rout underscored a divide even among top market stocks, according to Mike Dickson, head of research and quantitative strategies at Horizon Investments. “With this AI theme, there’s going to be winners and losers.
It’s a very powerful technology, and some companies will benefit greatly,” Dickson said.
Stocks slip post-Fed decision
“We’re going to see more of this bifurcation as the theme matures.”
Dickson expressed concern over the lack of a stronger bounce-back in stocks hit hard on Monday, including major tech firms and Broadcom.
Stocks slid following the Federal Reserve’s less optimistic tone on inflation, which some interpreted as a hawkish signal from central bankers, mentioned Seema Shah, chief global strategist of Principal Asset Management. Shah noted the omission of inflation progress from the Fed’s statement as a notable point. “The market is already jumping on this as a hawkish signal.
The lack of recent inflation improvement means a rate cut is currently not a desperate requirement, so a pause makes sense,” said Shah. She added that the Fed’s tone could become more dovish if the next month brings another soft inflation print and weakening job growth. Shares of big and regional banks hit session lows on Wednesday after the Fed’s decision to keep interest rates unchanged.
The SPDR S&P Regional Banking ETF and the SPDR S&P Bank ETF dropped around 0.9% each. JPMorgan Chase and Bank of America pulled back 0.4% and 0.2% respectively, while Regions Financial shed 0.3%, and Huntington Bancshares fell 0.9%. Stocks sat near session lows as investors awaited Fed Chair Jerome Powell’s press conference.
The Nasdaq led the three indexes lower with a slide of 1.1% shortly after 2:20 p.m. ET. The S&P 500 and Dow were down around 0.5% and 0.8%, respectively. On Wednesday, the Federal Reserve left its fed funds rate unchanged, meeting expectations.
The benchmark overnight borrowing rate remains in the target range of 4.25% to 4.50%. Stocks pulled back in response, with the S&P 500 and NASDAQ trading 0.8% and 1.1% lower respectively. The DJIA fell by 210 points, or 0.5%.
UBS noted that market jitters related to tariff threats are expected to rise this year. However, the investment firm believes there is still room for gains. “While market volatility seems inevitable, there are opportunities for growth, particularly in areas less affected by tariff uncertainty,” said a UBS representative.
Overall, the day’s trading was marked by a cautious tone reflective of the Federal Reserve’s decision to hold rates steady and a broader unease as various economic and geopolitical variables played out.
