US Stocks Close Lower as Fed Holds Rates Steady; Chip Shares Continue Decline, TSMC ADR Drops 4.50%

U.S. stock markets experienced a significant downturn on Wednesday, with major indices closing sharply lower. The Dow Jones Industrial Average plummeted over 1100 points, reflecting broad investor concerns. The sell-off was exacerbated by a continued decline in artificial intelligence-related chip stocks and a surge in oil prices, which climbed over 7% to surpass $90 per barrel amid escalating Middle East tensions.

The Federal Reserve announced its decision to maintain the federal funds rate between 3.50% and 3.75%. However, the Federal Open Market Committee (FOMC) revealed increased internal division, with three officials favoring a rate hike. This outcome was interpreted by the market as a hawkish signal, especially as inflation remains well above the Fed's 2% target. Fed Chair Jerome Powell reiterated the commitment to bringing inflation back down.

“

The Fed maintained its interest rates but signaled a more hawkish stance, with three officials advocating for a rate hike.

Investors are concerned that the Fed might sustain a tight monetary policy for an extended period, leading to a sell-off in long-term U.S. Treasury bonds. The semiconductor sector was particularly hard-hit, with the Nasdaq Composite and S&P 500 indices both falling more than 1.5%. The Philadelphia Semiconductor Index plunged over 5.3%.

Further impacting market sentiment, SK Hynix reported second-quarter earnings growth that fell short of Wall Street expectations, causing its ADR to drop 2.6%. This also dragged down memory chip stocks like SanDisk and Micron, which fell 7.32% and 9.94% respectively. While Meta Platforms' quarterly earnings disappointed, leading to a more than 7% drop in its after-hours stock price, Microsoft reported better-than-expected fourth-quarter results, initially boosting its shares.

“

Fed Chair Jerome Powell reiterated, still committed to bringing inflation back down to target.