US Stocks Plunge as Fed Holds Rates Amid Hawkish Signals; Chip Stocks Lead Decline

U.S. stock markets experienced a significant downturn, with major indices closing sharply lower on Wednesday. The Dow Jones Industrial Average plummeted over 1100 points, reflecting broad market weakness. This decline was exacerbated by a continued sell-off in artificial intelligence-related chip stocks, which have been a focal point of recent market volatility.

The Federal Reserve concluded its meeting by holding interest rates steady within the 3.50%-3.75% range. However, the Federal Open Market Committee (FOMC) revealed a growing internal divergence, with three members advocating for a rate increase. This split was interpreted by the market as a hawkish signal, suggesting the Fed might maintain a restrictive policy stance for an extended period to combat inflation, which remains well above the 2% target.

Investor concerns about prolonged tight monetary policy led to a sell-off in long-dated U.S. Treasury bonds. Adding to the market's woes, tensions in the Middle East escalated, causing Brent crude oil futures to surge over 7% and surpass $90 per barrel. This geopolitical instability further fueled selling pressure across U.S. equities.

The semiconductor sector was particularly hard-hit. The Nasdaq Composite and S&P 500 indices both fell more than 1.5%, while the Philadelphia Semiconductor Index plunged over 5%. SK Hynix's American depositary receipts (ADRs) continued their decline, dropping 2.6% after its second-quarter earnings, while strong, failed to meet Wall Street expectations. This weakness impacted other memory chip stocks like SanDisk and Micron, which saw significant drops of 7.32% and 9.94%, respectively.