Federal Reserve's Rate Decision Tempers Market Highs

U.S. stock markets experienced a volatile session, closing lower after Federal Reserve Chair Jerome Powell's remarks dampened hopes for a rate cut in September. Despite strong second-quarter growth figures, underlying economic vulnerabilities persisted. Market expectations shifted from a likely September rate cut after Powell's comments.

The U.S. stock market ended Wednesday's session markedly below earlier highs following a session fraught with fluctuations. This came after Federal Reserve Chair Jerome Powell cooled expectations that the central bank might cut rates in September.

The Fed's decision to keep rates unchanged was largely anticipated, yet two governors dissented, citing low unemployment and solid labor markets despite elevated inflation. Stocks were higher before Powell's statement due to stronger-than-expected second-quarter economic growth. However, deeper details showed potential weaknesses continuing to brew within the economy.

Market dynamics shifted after Powell noted it was too early to predict a rate cut at September's meeting, highlighting the current policy's restrictive but non-hindering impact on the economy. The anticipation for a rate cut plummeted after his comments, impacting both S&P 500 and Dow Jones performances. Meanwhile, strong corporate earnings reports provided some equity market support amidst ongoing tariff uncertainties and expectations for key mega-cap earnings.

(With inputs from agencies.)