US Market Reaction To Fed Policy; Nasdaq In Green, But Why Dow Jones, S&P 500 Ended In Red?

The US market reacted on a mixed trend to the US Federal Reserve's rate decision on Wednesday, June 18. While Dow Jones and S&P 500 indexes closed in red, the tech-heavy index Nasdaq Composite ended mildly on a positive note. Among the top performing stocks are Nvidia, Tesla, JP Morgan Chase, Apple, and Microsoft, while shares of Google, Visa, and Mastercard took a massive blow.

US Market Performance:

Dow Jones: The Dow Jones Industrial Average or DJIA index closed at 42,171.66, down by 44.14 points or 0.10%. The index ranged from 42,118.23 to 42,510.07.

S&P 500: The index ended at 5,980.87, down by 1.85 points or 0.031%. The Standard and Poor's 500 index performed between 5,971.89 to 6,018.25 during the session.

Nasdaq Composite: On the contrary, the tech-heavy index closed at 19,546.27, up by 25.18 points or 0.13%. Nasdaq ranged between 19,660.77 to 19,489.56 in the day.

Why Market Reacted Mix?

According to Trading Economics data, stocks in the US seesawed on Wednesday as investors reacted to the Federal Reserve's decision to keep interest rates unchanged and Fed Chair Powell's cautious tone amid rising geopolitical and economic uncertainty.

Powell emphasized the Fed's wait-and-see stance, citing uncertainty around the inflationary effects of President Trump's tariffs and the risk of stagflation, as officials projected two rate cuts in 2025 but downgraded growth forecasts and raised inflation expectations. Markets were further rattled by heightened tensions in the Middle East, with the ongoing Israel-Iran conflict raising fears of broader US involvement and pushing oil prices slightly higher. Trump confirmed that Iran had expressed interest in negotiations but left open the possibility of military action, keeping investors on edge. Visa, Mastercard, and Paypal sank over 4% each after Congress passed its stablecoins act, as per Trading Economics data.

US Fed Meeting Outcomes:

Maintaining its target of achieving maximum employment and inflation at the rate of 2% in the long run, the Fed decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent.

FOMC's statement said, "Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labour market conditions remain solid. Inflation remains somewhat elevated."

" Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate," FOMC said.

"The cost of the tariff has to be paid," Powell said. FOMC believes inflation remains elevated and the impact of tariffs has started to show signs.

For the time being, Powell said, "We are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Adriana D. Kugler; Alberto G. Musalem; Jeffrey R. Schmid; and Christopher J. Waller.

What To Expect In US Market Ahead?

According to Charles Schwab's market commentary on June 18, the S&P 500's current forward price-to-earnings (P/E) ratio is back near 22, historically high. That means the coming earnings season could grow in importance. First-quarter earnings surprised to the upside, but analysts expect much slower second quarter earnings growth. A host of positive surprises from major companies might be what's needed to give stocks more support, considering current pricing.

US market will be closed on June 19 due to Juneteenth National Independence Day. Meanwhile, on Friday, Accenture's earnings will be keenly watched.