Wall Street Reacts To Jerome Powell's Fed Decision: Market Gains Amid Inflation Warnings

In a widely expected move, Jerome Powell and the Federal Reserve decided to maintain the federal funds target rate at 4.25% to 4.5%, marking the third consecutive hold on interest rates. 
The statement from the FOMC pointed to increased risks to inflation, signaling that while the economy is growing steadily, the potential for higher inflation or rising unemployment has heightened.

“Uncertainty about the economic outlook has increased further,” the FOMC statement reads. “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.”

Market Reacts: S&P 500 Gains, But Tech Stocks Lead the Charge
While the S&P 500 initially fluctuated, it eventually closed 0.43% higher, largely driven by a more than 3% surge in Nvidia shares, which soared after reports surfaced that the Trump administration might lift some trade restrictions on semiconductor chips. This boosted sentiment for the tech sector, with the Nasdaq Composite climbing by 0.27%. Meanwhile, the Dow Jones Industrial Average rose by 0.7%, showing more positive movement in broader market indices.

Powell’s Inflation Warning: No Immediate Rate Cuts on the Horizon
In his press conference following the meeting, Jerome Powell reaffirmed the Fed's commitment to reducing inflation to its 2% target, despite recent signs of economic resilience. Powell emphasized that the central bank would not preemptively cut rates, even in the face of potential economic disruptions like tariffs, as inflation is still “above target”.

“We don’t know what the right responses to the data will be until we see more data,” Powell said, suggesting that the Fed will remain data-dependent and adjust its policies as more information becomes available.

Stock Shifts: AppLovin and Arm Holdings in the Spotlight
In after-hours trading, AppLovin saw its shares rise more than 13% after the company beat Wall Street expectations in its quarterly results. Additionally, AppLovin announced a significant restructuring, selling off its mobile gaming business.

On the other hand, Arm Holdings, a semiconductor company, saw its shares drop by more than 11% following disappointing guidance for the coming quarters. This highlights the volatility in certain sectors, especially those most affected by the broader economic environment and Fed policies.

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US Fed Policy Meet: Central Rate Cut Paused, Signals High-Inflation Risk

Economic Outlook: Inflation Still a Key Focus
While economic activity remains robust, with unemployment levels staying low and labor conditions solid, the Fed’s statement underscored concerns about inflation continuing to run high. 
 

The market's focus is now on upcoming data releases, such as jobless claims and the New York Fed’s Consumer Expectations Survey.

Looking Ahead: Earnings and Economic Data to Guide Market Sentiment
As investors await further guidance from economic indicators and the continued earnings season, major companies like ConocoPhillips, Warner Bros. Discovery, and Paramount Global are set to report quarterly results.

As Jerome Powell and the Fed continue to navigate inflation and economic growth, the path forward remains uncertain. Investors will closely watch incoming data and corporate earnings for more signals on how to adjust their portfolios in response to the Fed's evolving stance.