The stock market experienced a decline on Wednesday after the Federal Reserve’s first policy decision of the year. The S&P 500 fell 0.47% to close at 6,039.31, while the Nasdaq Composite slipped 0.51% to end at 19,632.32. The Dow Jones Industrial Average shed 136.83 points, or 0.31%, closing at 44,713.52.
The Federal Reserve left the federal funds rate in a range of 4.25% to 4.50%. The post-meeting statement expressed a cautious outlook toward persistent 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 noted.
“Inflation remains somewhat elevated.”
During a press conference, Fed Chair Jerome Powell discussed the cautious approach, noting that the central bank wants to avoid being a major factor in the next month’s economic forecast. Nvidia shares took a significant hit after Bloomberg News reported that Trump administration officials discussed curbing chip sales of the company to China following the emergence of the DeepSeek AI model. Nvidia shares ended the session down 4%, and for the week, the artificial intelligence leader is down more than 13%.
David Russell, global head of market strategy at TradeStation, commented, “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.”
Following Monday’s market movements influenced by the DeepSeek developments, UBS’ Solita Marcelli advised investors to take an active and diversified approach to artificial intelligence investing.
Stocks dip on Fed’s cautious outlook
Marcelli emphasized the importance of focusing on earnings results from tech companies and being prepared for market volatility. “AI is here to stay, and if anything, DeepSeek reinforces that,” Marcelli noted. She warned against overly concentrated or passive investment strategies, as value can swiftly shift within the AI ecosystem.
Mike Dickson of Horizon Investments pointed out that the emergence of DeepSeek has underscored a divide among top tech stocks. “With this AI theme, there’s going to be winners and losers. It’s a powerful technology, and therefore some companies will really benefit,” said Dickson.
Seema Shah of Principal Asset Management stated, “The market is already jumping on the omission of inflation progress from the FOMC statement as a hawkish signal.” Shah suggested that if next month brings another soft inflation print and weak job growth, the Fed’s tone could become more dovish. Shares of major and regional banks hit session lows on Wednesday after the Fed kept its key interest rate unchanged. The SPDR S&P Regional Banking ETF and the SPDR S&P Bank ETF both fell around 0.9%.
JPMorgan Chase and Bank of America saw modest declines, while Regions Financial and Huntington Bancshares fell by 0.3% and 0.9%, respectively. Despite the current market volatility and concerns over tariffs, UBS believes there is still potential for gains. However, investors should remain mindful of potential risks and maintain diversified portfolios to navigate the choppy market conditions.
