Stocks closed higher Wednesday after the Federal Reserve announced no changes to rate cuts and the central bank's chair, Jerome Powell, said policymakers would stand pat as the White House's tariffs rippled through the economy.
The blue-chip Dow Jones Industrial Average gained 0.7%, or 284.97 points, to close at 41,113.97, while the broad S&P 500 index was up 24.37 points, 0.4%, at 5,631.28. The Nasdaq Composite Index staged a comeback in the late afternoon, tacking on 0.3% or 48.50 points, to 17,738.16.
The benchmark 10-year Treasury note was down about four basis points near 4.27%.
Fed meeting
As was widely expected, policymakers made no changes to interest rates, and reiterated that they were comfortable in "wait and see" mode.
That approach may spur criticism from Trump, who's been calling for the Fed to lower rates immediately.
The White House's tariff announcements have left the central bank in a tough spot. They'll increase inflation, by making the cost of goods and services higher, which could be a reason to raise rates. But they may also cause economic weakness, if businesses can't hire as many people or have to cut back. That would be a reason to cut borrowing costs.
Stocks moved briefly lower midafternoon as Powell acknowledged the situation, saying, "There's so much uncertainty."
"Another hold from the Fed with an acknowledgement that uncertainty has increased with more upside risk for both inflation and unemployment," said ING Chief International Economist James Knightley in a note after the announcement. "This suggests little inclination to move until they are confident in the direction the economy is heading, meaning rate cuts could be delayed, but risk being sharper when they come."
China central bank cuts rates as talks drag on
Stocks opened higher Wednesday on hopes of progress toward a U.S.-China trade deal. On Tuesday, the Chinese central bank cut rates and eased lending requirements in what is seen as an attempt to bolster economic growth as the stalemate between the two countries dragged on.
The Treasury and U.S. Trade Representative's office said Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer would travel together to Geneva on May 8 to meet with China's top economic official. Discussions will center around de-escalation, an initial step seen toward trade talks.
The meeting is the first one confirmed between the countries since President Donald Trump announced tariffs as high as 145% on China that were met with retaliatory rates of 125% from Beijing. Escalating rhetoric between the two countries have roiled markets and added much uncertainty to the economy.