Wall Street slides as Fed holds rates, AI stocks tumble

U.S. stock markets closed lower on Wednesday following the Federal Reserve's decision to leave its benchmark rate in the 3.50%-3.75% range. The S&P 500 slipped to its lowest level in a month, while the Nasdaq composite fell about 9% from its June peak. The Nasdaq-100 index dropped 2.1%, extending recent losses as investors sold off AI-related stocks amid concerns over high capital spending.

Meta Platforms shares fell 4% in after-hours trading after the company revised its 2026 capital-expenditure outlook to $130-$145 billion, up from a prior range of $125-$145 billion. Microsoft, by contrast, rose 0.6% after reporting quarterly cloud-revenue growth that beat Wall Street estimates, suggesting its AI-infrastructure investments are beginning to generate returns.

Three members of the Federal Open Market Committee dissented, preferring a 0.25-percentage-point rate hike. "The Fed held pat, as expected. The bigger question now though becomes, how much pressure will they have to hike in September? Inflation is running hot and with surging crude oil, the market expects the next hike to indeed be in September," said Ryan Detrick, chief market strategist at Carson Group.

AI-related chipmakers also added to the declines. SK Hynix shares fell 10% after a six-fold profit surge failed to meet lofty expectations, and Vertiv dropped 17% after missing revenue forecasts. The Dow Jones Industrial Average slipped 2.19% to 51,594.14 points, the S&P 500 fell 1.52% to 7,316.15 points, and the Nasdaq ended down 1.74% at 24,442.94 points.

Other notable moves included Ford Motor gaining 2.1% after raising its annual profit outlook for a second time this year, Lennox falling 21% on a lowered profit forecast, and Visa rising 0.6% after beating profit estimates, helped by travel demand linked to the World Cup. Trading volume was slightly above recent averages, with 17.7 billion shares exchanged.