Markets gain as Nvidia jumps and gold climbs after Fed flags dual risks to its economic mandate
On Wednesday, stocks rose despite fresh warnings from the US Federal Reserve that both inflation and unemployment risks are rising, as global trade tensions and tariff policies threaten to complicate economic recovery efforts.
The S&P 500 gained 0.43 percent to close at 5,631.28, the Nasdaq Composite rose 0.27 percent to 17,738.16, and the Dow Jones Industrial Average added 284.97 points, or 0.70 percent, to end at 41,113.97, according to CNBC.
A nearly 11 percent jump in Disney shares, after stronger-than-expected second-quarter earnings and a surprise rise in streaming subscribers, lifted the Dow.
The US Federal Open Market Committee held its benchmark overnight borrowing rate at 4.25 percent to 4.5 percent, where it has remained since December.
In its post-meeting statement, the Fed said it is “attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Fed Chair Jerome Powell warned during a post-decision press conference that if the “large increases in tariffs” remain unchanged, they could “lead to a slowdown in economic growth, an uptick in long-term inflation and an increase in unemployment”.
David Kelly, chief global strategist at JPMorgan Asset Management, told CNBC’s Power Lunch that the Fed’s statement was “somewhat hawkish” and interpreted it as a signal to the administration that “Your policies are leading to higher inflation, higher unemployment.”
Kelly added, “We are not going to be in any hurry to cut rates because honestly there are risks to both sides of our mandate here and we are not sure which way we should be playing this.”
The warning comes as the market absorbs renewed concerns about trade policy.
According to CNBC, US President Donald Trump stated he would not reduce tariffs on China as a precondition to begin negotiations. Meetings between US and Chinese officials are scheduled to take place in Switzerland.
Gold prices moved slightly higher following the Fed’s warning, with spot gold up 0.2 percent at US$3,373.34/oz in early Asian trading, according to The Wall Street Journal.
BofA Global Research’s commodity team stated that gold tends to perform well during periods of economic uncertainty.
The team added that its model indicates gold can stay above US$3,000/oz, but likely not above US$3,500/oz unless trade disputes ease.
CNBC also reported that Nvidia shares rose 3 percent after Bloomberg disclosed the Trump administration’s plan to rescind Biden-era artificial intelligence chip restrictions known as the “AI diffusion rule.”
A Department of Commerce spokesperson confirmed to CNBC that the rule—described as “overly complex, overly bureaucratic”—would be replaced with one that “unleashes American innovation and ensures American AI dominance.”
The rule, which was to take effect May 15, organized countries into three tiers with different restrictions on exports of advanced AI chips made by firms like Nvidia, AMD, and Intel.
Nvidia declined to comment, but AMD CEO Lisa Su said the US should balance national security with policies that support the domestic chip industry.
Nvidia CEO Jensen Huang said earlier this week that being locked out of the Chinese AI market would be a “tremendous loss.”
Meanwhile, losses in Alphabet and Apple weighed on broader markets. Shares dropped roughly 7 percent and 1 percent, respectively.
According to Bloomberg, Apple’s services chief revealed plans to integrate artificial intelligence into Safari browser search functions, which could end Apple’s partnership with Google.
