U.S. stocks edged up on Wednesday after the Federal Reserve maintained its benchmark interest rate, a decision that had been largely anticipated, yet simultaneously issued a caution regarding escalating risks to the U.S. economy.

The S&P 500 index advanced by 0.4%, recovering from a two-day decline that had interrupted its nine-day upward trend. Concurrently, the Dow Jones Industrial Average increased by 284 points, a gain of 0.7%, while the Nasdaq composite index experienced a 0.3% rise.

Market indexes fluctuated considerably throughout the day, with the Dow Jones Industrial Average briefly gaining as much as 400 points on optimism surrounding potential initial steps by the United States and China towards a trade agreement aimed at safeguarding the global economy. The two largest economies have progressively imposed rising tariffs on each other's goods in an escalating trade dispute, raising concerns that this could trigger a recession unless they facilitate freer trade.

The announcement of high-level talks between U.S. and Chinese officials in Switzerland this weekend initially fostered optimism, yet this sentiment was somewhat tempered after President Donald Trump stated he would not reduce his 145% tariffs on Chinese goods as a precondition for negotiations. China has stipulated the de-escalation of these tariffs as a prerequisite for trade negotiations, which these meetings are intended to facilitate.

The uncertainty about tariffs, which comes and goes, has caused big changes in the U.S. economy. For example, there was a sudden increase in imports as companies tried to avoid paying tariffs. Even though there are these changes and surveys show that people in the U.S. are becoming more negative about the future, the Fed still says the economy is growing "at a good speed" right now.

Fed Chair Jerome Powell stated that this allows the central bank to wait before potentially changing interest rates, even though Trump has been pushing for faster cuts to boost the economy.

"There's a lot we don't know," Powell said. So, like everyone else on Wall Street and around the world, the Fed is waiting to see what will really happen in Trump's trade war and if his tariffs, which were much tougher than expected, will have the effect he planned.

This is especially pertinent now that the trade conflict appears to be entering "a new phase," Powell stated, in which the United States is engaging in more extensive trade negotiations with other nations.

The Federal Reserve acknowledged the escalating economic risks stemming from tariffs, which have the potential to both undermine employment growth and fuel inflationary pressures.

Powell stated that if the significant tariff hikes recently announced persist, they will likely lead to increased inflation, decelerated economic growth, and a rise in unemployment.

This could culminate in a dire situation for the Federal Reserve, known as "stagflation," characterized by economic stagnation alongside persistent high inflation. This combination is particularly problematic as the Fed lacks effective instruments to address it. For instance, attempting to stimulate the economy and employment by reducing interest rates might exacerbate inflation, while increasing rates would yield the contrary outcome.

Meanwhile, major U.S. corporations continue to generate more substantial profits for the commencement of 2025 than anticipated by analysts.

The Walt Disney Co.'s stock surged by 10.8% following a decisive outperformance of analysts' profit expectations, a revised upward profit projection, and the acquisition of over a million new streaming subscribers.

Businesses, however, are persistently cautioning that economic instability is impeding their ability to project their financial outcomes.

Marvell Technology, a prominent chipmaker, saw its stock price drop by 8% following the postponement of its investor day, originally scheduled for June, to an unspecified future date due to current economic instability.

Overall, the S&P 500 index increased by 24.37 points, closing at 5,631.28. Similarly, the Dow Jones Industrial Average advanced 284.97 points to reach 41,113.97, while the Nasdaq composite index saw a gain of 48.50 points, ending the session at 17,738.16.

In the bond market, Treasury yields declined subsequent to the Federal Reserve's announcement. The yield on the 10-year Treasury subtly decreased to 4.27% from 4.30% late on Tuesday.

European markets largely experienced declines, while their Asian counterparts saw gains. Indices advanced by 0.1% in Hong Kong and 0.8% in Shanghai, following Beijing's implementation of interest rate reductions and other measures aimed at bolstering the Chinese economy and markets, which are facing pressure from increased tariffs imposed by Trump impacting the nation's exports.