A rally faded and stocks wavered on Wednesday after Fed Chair Jerome Powell said it is too soon to fully gauge the economic impact of tariffs, complicating the outlook for the Federal Reserve.
The Dow closed lower by 44 points, or 0.1%. The broader S&P 500 edged lower by 0.03% and the tech-heavy Nasdaq Composite gained 0.13%.
The Fed on Wednesday held its benchmark interest steady, matching Wall Street’s expectations. The Fed in a statement said uncertainty has “diminished” but “remains elevated.”
Stocks initially held on to their gains after the decision was announced before dropping lower during Powell’s afternoon press conference.
Investors digested Powell’s remarks that while uncertainty has peaked, it is still tremendously difficult to forecast the inflationary impact of tariffs.
“The Fed continues to be on high alert for tariff-driven inflation,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. “A healthy labor market is allowing the Fed to remain on hold as the inflation story unfolds.”
“Powell said without tariffs, confidence would be building that inflation is coming down given the recent data,” St. Aubin said. “This was an implicit admission that tariff uncertainty is paralyzing monetary policy.”
Elsewhere in markets, Treasury yields fluctuated during choppy trading as bond investors tried to parse the Fed’s outlook.
A rally in Treasuries was snapped short on Wednesday after Powell’s remarks that the Fed is in no hurry to cut interest rates. The yield 10-year Treasury had been drifting lower across the day before spiking higher during Powell’s remarks.
The 10-year yield traded around 4.39% as of 4 p.m. ET, slightly up on the day. Yields and prices trade in opposite directions.
