US stocks nosedive after Fed keeps rates unchanged amid tariff uncertainty

U.S. stock indexes fell sharply following the Federal Reserve's decision to hold rates steady, even as a steep decline in shares of Google-parent Alphabet weighed heavily on the Nasdaq.

The Dow Jones was up 64.77 points or 0.16% to 40,893.77, down about 300 points from day's high, while the S&P 500 fell 20.73 points or 0.37% to 5,586.11, down about 30 points from peak, and the Nasdaq declined 155.13 points or 0.88% to 17,534.53, down over 100 points from the top.

The US Federal Reserve on Wednesday announced another rate cut pause and warned of higher risks to its inflation and unemployment goals in a likely reference to President Donald Trump's tariffs

Policymakers voted unanimously to hold the US central bank's key lending rate at between 4.25 percent and 4.50 percent, the Fed said in a statement.

Traders are now roughly pricing in a rate cut by July, according to data compiled by LSEG, after a mixed-bag of earnings last week signaled a slowing U.S. economy and resilient labor market.

Commentary from policymakers will be scrutinized for clues on how they plan to approach monetary policy easing this year, given the backdrop of President Donald Trump's criticism of the central bank and an uncertain trade environment.

"At the moment, the U.S. labor market is still strong and healthy... the Fed really has a lot of reasons to indicate that they are not likely to cut rates in the near term," said Nicholas Brooks, head of economic and investment research at ICG.

A 6.4% fall in Alphabet's shares dragged on the tech-heavy Nasdaq, while the communication services sector weighed on the benchmark S&P 500.

A report said iPhone-maker Apple was exploring the option of adding artificial-intelligence search options to its web browser, citing an executive. Apple's shares were trading at nearly two-week lows.

On the flip side, a 10.5% jump in Walt Disney's stock after the streaming firm's quarterly results topped Street expectations boosted the Dow.

The three main indexes were higher in early morning trading, a day after Washington announced that representatives of the two countries would meet over the weekend in Switzerland for ice-breaker trade discussions following weeks of tit-for-tat tariffs between the United States and China.

The Trump administration has said potential deals with major trading partners are underway, but the markets are yet to see tangible results on that front.

"What markets really want to see is tariffs removed as quickly as possible on both sides... the longer this disruption and uncertainty continues, the more economic damage we'll see," Brooks said.

Wall Street ended lower for the second straight session on Tuesday, but all three indexes have recouped declines logged since Trump's announcement of "Liberation Day" reciprocal tariffs on April 2.

Uber dropped 2.2% as the ride-hailing company missed quarterly revenue expectations. CrowdStrike dropped 3.8%. The cybersecurity company reiterated its fiscal 2025 and 2026 forecasts and announced a plan to cut jobs.

Contract research firm Charles River Laboratories shot up 14.7% after it said it had reached an agreement with activist investor Elliott Investment Management and raised its 2025 earnings forecast.

Arista Networks fell 7% after its quarterly results.

Advancing issues outnumbered decliners by a 1.92-to-1 ratio on the NYSE, and by a 1.24-to-1 ratio on the Nasdaq.

The S&P 500 posted 11 new 52-week highs and eight new lows, while the Nasdaq Composite recorded 40 new highs and 66 new lows.