Wall Street closed sharply lower on Wednesday (Thursday AEST) after the Federal Reserve left interest rates unchanged, while AI-related chip stocks extended recent losses ahead of quarterly earnings from Microsoft and Meta Platforms.
The Dow Jones Industrial Average fell 1,153.2 points, or 2.2%, to 51,594.1, marking its biggest one-day decline since 21 April 2025. The S&P 500 dropped 112.6 points, or 1.5%, to 7,316.2, while the Nasdaq declined 434.0 points, or 1.7%, to 24,442.9.
The Federal Reserve kept its benchmark interest rate unchanged at 3.50%-3.75%, a decision that was widely expected.
However, three of the 12 members of the Federal Open Market Committee dissented, saying they preferred a quarter-percentage-point rate increase at the meeting.
Inflation has remained above the central bank's target for more than five years and had been accelerating until last month as the war in the Middle East pushed up global fuel and food prices.
Investors also remained concerned that major U.S. companies are continuing to invest billions of dollars in artificial intelligence, raising questions about the impact on free cash flow.
At the same time, competition from China has intensified as companies race to develop advanced chips and Chinese firms introduce lower-cost AI models.
AI-related chipmakers came under further pressure after SK Hynix reported a sixfold increase in quarterly profit that fell short of investor expectations. Shares in the South Korean company dropped 10%.
AI infrastructure company Vertiv slumped 17% after missing quarterly revenue expectations.
Among other reporting companies, Ford Motor gained 2.1% after raising its annual profit outlook for a second time this year, while Lennox tumbled 21% after lowering its annual profit forecast.
Visa rose 0.6% after beating quarterly profit estimates, supported by World Cup-fuelled travel demand.
In extended trading, Meta Platforms fell 8.1% after raising its expected 2026 capital expenditure range to between $130 billion and $145 billion, compared with its previous forecast of $125 billion to $145 billion.
Microsoft rose 7.9% after the closing bell after topping Wall Street estimates for quarterly cloud revenue growth.
On the bond markets, the 10-year Treasury yield rose 1.8% to 4.687%, while the two-year Treasury yield slipped 0.4% to 4.266%.
