NEW YORK, July 30 — US stocks ended sharply lower on Wednesday after the Federal Reserve kept interest rates unchanged, while rising inflation concerns and escalating tensions in the Middle East weighed heavily on investor confidence.
Major US stock indexes closed more than 1.5 per cent lower after initially showing a positive reaction to the Fed’s decision. However, market sentiment shifted during Federal Reserve Chair Kevin Warsh’s press conference, as investors remained uncertain over the central bank’s approach to controlling inflation.
Warsh reaffirmed the Fed’s commitment to bringing inflation back to its two per cent target, while defending the decision to maintain current interest rates.
“The market is getting mixed messages from the Fed,” said Adam Sarhan of 50 Park Investments, adding that inflation concerns remained unresolved.
US inflation stood at 3.5 per cent in June on an annual basis, continuing to remain above the Federal Reserve’s target.
Investor concerns were further intensified by a sharp rise in oil prices following renewed conflict in the Middle East. President Donald Trump had vowed a strong response after Iran attacked US bases in Jordan, while Saudi Arabia and the United States announced strikes on militant positions in Iraq.
International benchmark Brent crude futures surged nearly eight per cent to US$90.74 per barrel, raising fears that higher energy prices could further fuel inflation.
“We continue to see oil prices and inflation pressures moving higher as inventories drain further amid the lack of peace in the Persian Gulf,” said Bart Melek of TD Securities.
Meanwhile, investors continued monitoring earnings from major technology companies involved in artificial intelligence (AI) development, which has been a major driver of US market growth.
The technology sector has faced growing pressure as investors question whether recent gains are supported by actual earnings growth.
After the market closed, Microsoft shares gained following its earnings report, while Meta shares dropped sharply after the company warned of increasing AI investment costs.
The bond market also reflected investor concerns, with the yield on the 30-year US Treasury note rising to 5.22 per cent, compared with 4.61 per cent before the latest Middle East escalation.
Analysts said the increase suggested investors were becoming less confident in the Fed’s ability to quickly return inflation to its two per cent goal.
Meanwhile, global markets also suffered losses. South Korea’s benchmark index plunged six per cent, extending losses from the previous session, while technology giants SK hynix and Samsung faced heavy selling pressure despite reporting strong earnings.
Tokyo’s stock market declined 1.5 per cent, while Taiwan’s market dropped nearly four per cent.
In Europe, London’s FTSE 100 briefly reached a record high as rising oil prices boosted major energy companies such as Shell and BP before closing lower.
Luxury fashion company Hermès saw its shares fall more than 11 per cent after weak demand in China affected its latest results, while Gucci owner Kering gained more than 15 per cent following its earnings announcement.
Source: AFP
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