NEW YORK (AP) — U.S. stocks are climbing Wednesday after the Federal Reserve said the economy still looks healthy enough to keep interest rates where they are. Wall Street also got a boost from easing yields in the bond market.
The S&P 500 was up 1.2% in late trading, and its gains increased following the Fed's announcement. The Dow Jones Industrial Average was up 427 points, or 1%, as of 3:30 p.m. Eastern time, and the Nasdaq composite was 1.5% higher.
The rally followed weeks of sharp and scary swings for the U.S. stock market. Uncertainty is high about how much pain President Donald Trump will allow the economy to endure in order to remake the system as he wants. He’s said he wants manufacturing jobs back in the United States and far fewer people working for the federal government.
Trump’s barrage of announcements on tariffs and other policies have created so much uncertainty that economists worry U.S. businesses and households may freeze and pull back on their spending.
Fed Chair Jerome Powell acknowledged the rising pessimism among U.S. consumers and companies shown by recent surveys, but he also pointed to indicators showing the economy remains in a solid place, including a relatively low unemployment rate. He said it's possible to have periods where “people say downbeat things about the economy and then go out and buy a new car.”
“Given where we are, we think our policy is in a good place to react to what comes, and we think the right thing to do is wait here for greater clarity,” Powell said.
Fed officials indicated they're still penciling in two cuts to the federal funds rate by the end of this year, just as they were forecasting at the end of last year. But they are also seeing weaker growth for the U.S. economy and higher inflation than they were before.
That raises fears about what's called “ stagflation,” where the economy stagnates but inflation remains high. The Fed doesn't have good tools to fix such a toxic combination.
Stocks nevertheless rose despite such warnings, as lower Treasury yields in the bond market eased some of the pressure.
The yield on the 10-year Treasury dropped to 4.25% from 4.31% just before the Fed announced its decision. When bonds are paying less in interest like that, they can encourage investors to pay higher prices for stocks, which can offer higher returns in the long term.
Besides holding its main short-term interest rate steady, the Fed also said it will begin paring the monthly reductions of its trove of Treasurys beginning in April. That means it will allow only up to $5 billion of its massive trove of Treasurys to mature each month, down from a prior cap of $25 billion. By reinvesting more in Treasurys each month, the Fed will essentially be helping to keep longer-term yields lower than they would otherwise be.
Powell repeated several times that the move was more technical than a signal about coming changes in policy. He said it was the result of seeing “some signs of increased tightness in money markets.”
“It isn’t sending a signal in any hidden way,” he said.
On Wall Street, Nvidia helped support the market after rising 2.4% to cut its loss for the year so far to 12%. It hosted an event Tuesday where it largely “did a nice job laying out the roadmap” and fighting back against speculation the artificial-intelligence industry is seeing a slowdown in demand for computing power, according to UBS analysts led by Timothy Arcuri.
Tesla rose 4.9%, following two straight losses of roughly 5%. It’s still down 41.5% for 2025 so far. It's been struggling on worries that customers are turned off by CEO Elon Musk's leading efforts to slash spending by the U.S. government.
Big Tech has generally been at the center of the market’s recent sell-off, as stocks whose momentum had earlier seemed unstoppable have since dropped sharply following criticism they had simply grown too expensive.
On the losing side of Wall Street Wednesday was General Mills, which fell 1.8% despite reporting a stronger profit for the latest quarter than analysts expected.
The cereal and snack maker's revenue fell short of analysts' targets, in part because of a slowdown in sales for snacks. General Mills also cut forecasts for revenue and profit over its full fiscal year, partly because it expects “macroeconomic uncertainty” to continue to affect its customers.
In stock markets abroad, Japan’s Nikkei 225 slipped 0.2% after the Bank of Japan held steady on its own interest rates, as was widely expected. Japan also reported a trade surplus for February, with exports rising more than 11% as manufacturers rushed to beat rising tariffs imposed by Trump.
Other indexes were mixed across Europe and Asia.
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AP Business Writers Yuri Kageyama and Matt Ott contributed.