US stocks opened sharply lower on Wednesday, with the Dow Jones Industrial Average falling more than 450 points, as markets braced for the Federal Reserve's latest interest rate decision and a renewed selloff in semiconductor shares. The broader S&P 500 was little changed, while the Nasdaq Composite slipped about 0.19%.
The decline in the Dow was exacerbated by weakness in Procter & Gamble, which missed quarterly revenue expectations and fell more than 3.9% after forecasting slower revenue growth. The consumer products giant's disappointing outlook added to the negative sentiment ahead of the Fed's policy announcement.
Fed decision in focus
Investors are widely expecting the Federal Reserve to leave interest rates unchanged at its meeting concluding Wednesday afternoon. However, attention will center on Chair Kevin Warsh's comments for clues about inflation, economic conditions, and the future path of monetary policy. Elevated energy prices continue to influence inflation expectations, adding complexity to the Fed's decision-making.
Fed funds futures indicate markets still assign a high probability that policymakers will hold rates steady this week, though traders anticipate at least one quarter-point rate increase later this year. The central bank's stance remains a key driver for equity markets, as investors weigh the balance between inflation risks and economic growth.
Chip stocks under pressure
Semiconductor stocks continued to struggle after several days of selling, as investors questioned the sustainability of heavy spending on artificial intelligence infrastructure and weighed rising competition from China. The weakness extended from Asia into US trading after South Korean chipmaker SK Hynix reported quarterly results that failed to meet elevated investor expectations.
US-listed shares of SK Hynix edged up 0.56%, but other chip stocks declined. Applied Materials fell more than 1.7%, Sandisk slipped over 1.14%, and Nvidia dropped 0.32%. Intel bucked the trend, rising 0.27%. The iShares Semiconductor ETF remained under pressure after four consecutive losing sessions and was down nearly 7% for the week.
Technology stocks have been weighed down by concerns that billions of dollars invested in AI infrastructure may take longer to generate returns. Investors are now awaiting quarterly earnings from Microsoft and Meta Platforms after Wednesday's closing bell, followed by Amazon and Apple later in the week. Their results are expected to provide fresh insight into AI investment plans and demand for semiconductor infrastructure. For a broader perspective on the chip sector, see how much lower chip stocks can go.
Earnings season delivers mixed signals
Despite the weakness in technology shares, some companies posted strong results. Seagate Technology gained 5.6% after issuing quarterly guidance above market expectations, while Ford Motor climbed 4.3% after raising its full-year profit outlook for the second time this year. The second-quarter earnings season has continued to produce broadly positive results, with more than 85% of S&P 500 companies that have reported exceeding analyst expectations, according to LSEG data. That compares with a historical average of about 68%.
However, the chip selloff highlights growing investor skepticism about the near-term payoff from AI spending. As Micron defies the SK Hynix selloff, some investors are betting on AI memory demand, but the broader sector remains volatile.
Oil surges on Middle East tensions
Oil prices climbed sharply after President Donald Trump said the United States would respond to attacks on US forces in the Middle East. West Texas Intermediate crude rose nearly 7% to around $89.90 per barrel after US Central Command reported that multiple ballistic missiles launched toward US forces were intercepted. The rise in oil prices added another layer of uncertainty for markets already balancing inflation risks with expectations for future monetary policy.
Geopolitical tensions in the Middle East have also supported safe-haven assets, with gold holding near $4,029 as the Fed's decision looms. The combination of higher energy costs and geopolitical risk could further complicate the inflation outlook and the Fed's policy path.
As markets digest the Fed's decision and Big Tech earnings, the interplay between AI spending, chip demand, and monetary policy will remain in focus. The Dow's 450-point drop underscores the fragility of investor sentiment amid multiple crosscurrents.
This article is for informational purposes only and does not constitute financial advice.
