Federal Reserve Holds Rates Steady as Stock Market Reacts to Earnings and Tariff Concerns

Stocks held modest gains in Wednesday's afternoon trading as investors digested the Federal Reserve's decision to keep the key lending rate unchanged. This move, anticipated by most market participants, followed criticism from President Donald Trump, who has repeatedly urged the Fed to lower rates to stimulate economic growth. The S&P 500 edged up 0.2%, while the Nasdaq Composite gained 0.4%. The Dow Jones Industrial Average remained relatively stable.

Despite a previous six-day rally to record highs, the S&P 500 faced some turbulence earlier as strong corporate earnings and positive economic data hit a temporary pause. Investors were keenly listening to Fed Chair Jerome Powell's comments during a press conference, focusing on inflation prospects amid imminent tariffs.

The decision to hold rates steady comes in light of government data revealing a robust U.S. economy, which grew at an annualized rate of 3% in the second quarter, surpassing economists' forecasts. This performance signifies a rebound from the previous quarter's contraction, largely driven by tariff uncertainties. Upcoming reports on inflation and the labor market remain highly anticipated.

Investor attention remains fixed on earnings releases, with Microsoft and Meta set to report results after the closing bell on Wednesday, followed by Apple and Amazon's figures on Thursday. Despite mixed performances from mega-cap tech stocks, notable shifts were observed as Nvidia and Broadcom each saw around 2% increases, while Tesla dipped 1.5%.

Post-earnings movements saw Starbucks fluctuate, experiencing variable gains and losses after presenting mixed results. Meanwhile, Visa’s shares ticked down slightly after the company's earnings surpassed analyst projections. Humana and Hershey experienced significant rises of 10% and 3%, respectively, contrasting with Mondelez's 5% drop and GE HealthCare's considerable decline.

In the bond markets, the yield on the 10-year Treasury note, which influences a range of consumer and business loans, rose slightly to 4.35%. Concurrently, the U.S. dollar index climbed 0.5%, hitting its highest level since early June.

The Federal Reserve's decision to leave borrowing rates unchanged reflects its ongoing strategy to manage inflation, sustained by tariffs' potential economic impact. Two members of the Federal Open Market Committee dissented, favoring a rate cut. Current market conditions suggest a probable rate cut by September, with a forecasted likelihood of 58%.

The stock market's narrative was further complemented by individual company performances. Humana raised its earnings guidance, anticipating a full-year EPS of $17.00, higher than its previous outlook, navigating through reduced Medicare Advantage membership losses. This announcement propelled its stock upward, trimming its year-to-date decline to approximately 3%.

Teradyne led gains in the S&P 500 following its solid second-quarter earnings, bolstered by its Semiconductor Test Group's performance. Despite facing an annual revenue dip, Teradyne exceeded expectations with adjusted earnings and projected sequential growth in the third quarter. The firm detailed growth in its System-on-a-Chip segment, driven by increased demand for AI applications.

Microsoft and Meta presented contrasting scenarios leading into their anticipated earnings reports. Microsoft's shares had advanced about 20% in 2025, fueled by optimism surrounding its AI-driven strategies. Analysts remain bullish, with favorable ratings and increased price targets, attributed to Microsoft's robust positioning in enterprise software and cloud computing, particularly Azure.

Meta shares also mirrored optimism, strengthened by its dedicated investment in AI technology. Analysts forecast positive performance on the back of strategic AI infrastructure spending, with expectations of strong second-quarter financials.

On a day of diverse corporate outcomes, GE HealthCare experienced a share price drop despite exceeding quarterly expectations and revising full-year guidance. Tariff impacts have slightly softened, yet the revised EPS forecast fails to match projections at the year’s start.

Marvell Technology benefited from an analyst rating lift, propelled by thriving AI demands that promise lucrative returns over the coming year. Enhanced price targets across several semiconductor stocks indicate broad confidence in AI spending resilience.

Looking abroad, market indices exhibited a mixed performance across Europe and Asia, underscoring global economic complexities amid U.S. economic maneuvers and fiscal policies.

While the Fed's rate decision represents a calculated restraint, it highlights ongoing inflation management efforts amid looming tariff challenges initiated by President Trump. Investors continue to evaluate the broader impacts of these developments on corporate profitability and economic growth trajectories.