NEW YORK (AP) — U.S. stocks slipped after the Federal Reserve held its main interest rate steady and broke a run of cuts that began in September. The S&P 500 fell 0.5% Wednesday. The Dow Jones Industrial Average dipped 0.3%, and the Nasdaq composite fell 0.5%. Treasury yields held relatively steady following the Fed’s announcement, which could hint at interest rates staying on hold for a while. Lower rates would help the economy by making it cheaper for U.S. households and companies to borrow, but they could give also inflation more fuel. Nvidia sank again to continue its shaky week after DeepSeek upended the AI industry.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — U.S. stocks are slipping Wednesday after the Federal Reserve opted not to cut interest rates for the first time since it began trying to help the economy through easier rates in September.
The S&P 500 was down 0.8% in afternoon trading, with its loss widening a touch after the Fed announced its decision, which was widely expected on Wall Street. The Dow Jones Industrial Average was down 205 points, or 0.5%, as of 2:15 p.m. Eastern time, and the Nasdaq composite was 1.1% lower.
Treasury yields rose after the announcement, which could hint at interest rates staying on hold for a while following their swift drop at the end of 2024. Lower rates would help the economy by making it cheaper for U.S. households and companies to borrow, but the downside is they could give also inflation more fuel.
The bond market's were nevertheless more modest than they were earlier this week, same as with the stock market, following two days of disruption driven by doubts about the artificial-intelligence boom.
The Federal Reserve's decisions are often at the center of financial markets' action, but a Chinese upstart, DeepSeek, has yanked the spotlight over the AI industry after saying it developed a large-language model that can compete with the world’s best without having to use Nvidia’s top chips.
That cast doubt about whether AI development broadly will require as much spending on chips, vast data centers and electricity as much of Wall Street and Big Tech had been assuming. That in turn caused huge swings for stocks across the industry, particularly for Nvidia.
The company, whose stock has almost become a symbol of the AI bonanza, fell 6.3% Wednesday after plunging nearly 17% Monday and then jumping nearly 9% Tuesday. It was the single heaviest weight dragging the S&P 500 lower, by far.
The AI industry could get another jolt after trading ends for the day. That's when several influential companies like Microsoft, Meta Platforms and Tesla are scheduled to report their latest quarterly results. Analysts are likely to ask them about whether DeepSeek’s discovery will mean lower investment from them in building out AI.
Such answers could help guide the next jagged move for the industry, which was instrumental in the S&P 500’s rallying to back-to-back yearly gains of more than 20% for the first time since before the millennium.
Meta, Microsoft and Tesla all fell ahead of their reports to drag on the market.
On Wall Street, Starbucks rose 8.6% after delivering a better profit for the latest quarter than analysts expected. CEO Brian Niccol said the chain is planning to cut its food and beverage offerings by 30% over the course of this year to simplify operations and speed service, part of its efforts to turn the company around.
T-Mobile US rallied 6.9% after topping Wall Street's expectations for both profit and revenue in the last three months of 2024. It also said it expects to add between a net 5.5 million and 6 million in postpaid customers this year.
Brinker International jumped 15.4% after the company behind Chili’s restaurants delivered better results than expected. CEO Kevin Hochman said Chili’s attracted new customers and that its return customers were coming more frequently.
Railroad operator Norfolk Southern rose 2.6% after it beat Wall Street’s profit forecasts. There is also growing optimism that a Republican-controlled Congress could ease restrictions on the industry.
Frontier Group Holdings climbed 4.8% after announcing it would try for a second time to merge with Spirit Airlines, which sought bankruptcy protection late last year. Frontier said the proposed deal would include newly issued Frontier debt and common stock.
Trump Media & Technology Group rose after announcing it would be getting into the financial services business via a partnership with Charles Schwab. TMTG said more details would be released later this year, and what had been a double-digit gain for the notoriously volatile stock shrank to an increase of about 6.5%.
On the losing end of Wall Street was Danaher, which fell 9.4% after the life sciences, biotechnology and diagnostics company reported results for the latest quarter that just missed analysts’ expectations.
In the bond market, the yield on the 10-year Treasury rose to 4.57% from 4.53% late Tuesday.
In stock markets abroad, indexes were mixed in Europe. ASML’s stock jumped 5.6% in Amsterdam after announcing strong revenue on demand for its advanced chipmaking tools.
In Asia, where many markets were closed for holidays, Japan’s Nikkei 225 rose 1%.
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AP Writers Matt Ott and Zimo Zhong contributed.
Stan Choe, The Associated Press