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US stocks dropped on Wednesday as bond yields rose after the Federal Reserve voted to hold rates steady, with three members dissenting and voting for a hike.
The Dow Jones Industrial Average (^DJI) fell more than 1,100 points or 2.2% as oil prices rose amid renewed tensions in the Middle East, and long-dated Treasury yields rose following the Fed decision.
The S&P 500 (^GSPC) dropped 1.5%, while the tech-heavy Nasdaq Composite (^IXIC) sank about 1.7% as a sell-off in chip stocks continued to deepen.
Markets were digesting the Federal Reserve's decision to hold interest rates steady, with three FOMC members voting against it in favor of a rate hike. The decision marks a pivotal moment for the central bank as inflation remains well above the Fed's 2% target.
Meanwhile, investors once again dumped chip stocks ahead of Big Tech earnings after SK Hynix's (000660.KS, SKHY) surging second quarter profit was less than Wall Street expected, prompting concerns that the artificial intelligence boom may be slowing.
Two "Magnificent Seven" quarterly results stand as another big catalyst for the AI trade, with reports from Microsoft (MSFT) and Meta (META) dropping after the bell. It could be a make-or-break moment for tech stocks after Alphabet's (GOOG, GOOGL) capital expenditure guidance last week spooked markets, resurfacing fears about the AI boom's sustainability.
In the Middle East conflict, Iran launched an "attempted surprise attack" on Tuesday, according to US Central Command, reengaging fighting between the US and Iran for the first time since a pause in hostilities on Friday. Oil prices jumped, with Brent crude (BZ=F) gaining more than 7% to trade back over $90 per barrel.
Aside from the Big Tech updates, markets will be treated to a slew of quarterly updates from consumer-facing companies, including Starbucks (SBUX), Chipotle Mexican Grill (CMG), and AI-exposed Qualcomm (QCOM) and Arm Holdings (ARM) results after the bell.
