United States benchmark averages closed higher on Wednesday (Thursday AEST), lifted by optimism around U.S. trade policy, despite the Federal Reserve warning of increased risks to the economic outlook.
The Dow Jones Industrial Average rose 285.0 points, or 0.7%, to 41,114.0. The S&P 500 added 24.4 points, or 0.4%, to 5,631.3, while the Nasdaq Composite climbed 48.5 points, or 0.3%, to 17,738.2.
A notable contributor to the Dow's gain was Disney, which surged 10.8% after reporting stronger-than-expected fiscal second-quarter earnings and an unexpected increase in streaming subscribers.
Late in the session, chipmaker stocks rallied following a Bloomberg report that the Trump administration plans to rescind curbs on artificial intelligence chip exports.
Nvidia jumped 3.1%, Taiwan Semiconductor added 1.3% and Micron Technology added 2.6%.
Market gains were partially capped by declines in tech giants Alphabet and Apple, which fell 7.5% and 1.1%, respectively. A Bloomberg report indicated that Apple may introduce artificial intelligence-based search services within its Safari browser, which could potentially end its search partnership with Google.
As widely anticipated, the Federal Open Market Committee kept its benchmark interest rate unchanged in a range of 4.25% to 4.5%, maintaining its stance since December. However, the Fed’s post-meeting statement acknowledged rising risks:
“The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Fed Chair Jerome Powell further warned that existing trade tariffs could weigh on the economy:
“If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment. The effects on inflation could be short-lived—reflecting a one-time shift in the price level.
"It is also possible that the inflationary effects could instead be more persistent.
"Avoiding that outcome will depend on the size of the tariff effects, on how long it takes for them to pass through fully into prices, and, ultimately, on keeping longer-term inflation expectations well anchored.” he said at a press conference.
Earlier in the day, U.S. President Donald Trump reiterated his administration's tough stance on China, stating he would not lower tariffs as a precondition for initiating trade talks.
Discussions between U.S. and Chinese officials are scheduled to take place this weekend in Switzerland.
In the bond market, yields moved lower. The 10-year Treasury yield dropped to 3.783%, down 0.7%, while the 2-year yield fell by 0.1% to 4.269%.
