Stocks hold firm as Fed pauses

U.S. stock markets ended the trading day with modest gains on Wednesday. The S&P 500 index rose 21.38 points, or 0.3%, to close at 7,743.98. The Dow Jones Industrial Average added 97.53 points to reach 52,475.10, and the Nasdaq composite climbed 72.04 points to 26,549.85.

These moves followed the Federal Reserve's decision to hold its main interest rate steady. The central bank had raised rates last month for the first time in three years to combat inflation, which has stayed above its 2% target for several years. The new decision signals a pause in that tightening cycle.

The bond market reacted more sharply than the stock market. The yield on the two-year Treasury, which tracks expectations for future Fed moves, initially jumped. It rose from 4.70% late Tuesday to above 4.79% after reports indicated two Fed officials wanted to hike rates but were outvoted.

The yield quickly reversed direction, dropping to 4.69%. This shift followed comments from Fed Chairman Kevin Warsh. He stated that the central bank wants to observe how economic conditions evolve before making its next move. He noted that loan rates have climbed and that lenders and investors have become more discerning in their assessments.

Warsh indicated that the prevailing view among Fed officials is that monetary policy is beginning to show results. He said the current economic developments align with the Fed's goals of maintaining a healthy job market and keeping inflation relatively low. Traders on Wall Street still anticipate further rate increases, but they have reduced their bets on the number of hikes likely by next summer, according to CME Group data.

The 10-year Treasury yield, which reflects long-term inflation and growth expectations, also fluctuated. It ended the day at 5.02%, up from 4.99% the previous night. Rising oil prices contributed to this upward pressure. A barrel of Brent crude, the international standard, climbed 2% to $111.64 amid ongoing uncertainty in the Middle East and global energy markets.

Individual stocks showed mixed results. GE HealthCare Technologies rose 6.6% after beating summer profit and revenue expectations and raising its full-year forecasts. Etsy gained 5.4% after its quarterly profit surpassed forecasts. CEO Kruti Patel Goyal noted that active buyers grew for the first time in two years, while the active seller base expanded at its fastest rate in the same period.

Artificial intelligence stocks remained stable after recent volatility. Micron Technology rose 5.9%, serving as the strongest driver for the S&P 500. The memory chip maker followed South Korea's SK Hynix, which surged 10.9% in Seoul. SK Hynix reported that demand for its chips is expected to outpace supply through 2030 due to rising AI usage.

Wendy's shares jumped 15.1% after Trian Fund Management, led by Nelson Peltz, offered to buy the restaurant chain. This gain helped offset losses in other sectors. Boston Scientific fell 5.8% despite a milder profit drop than expected, as its forecast for the current quarter missed analyst estimates. Robinhood Markets declined 3.3% after reporting weaker profit and revenue figures for the latest quarter.

International markets also responded to the news. South Korea's Kospi index jumped 6.6% on the back of SK Hynix's strong performance. Japan's Nikkei 225 rose 1.1%, while France's CAC 40 index slipped by less than 0.1%.