US stock indices saw a slight increase on Wednesday after the Federal Reserve maintained its primary interest rate, a move broadly anticipated, while simultaneously issuing a caution regarding the growing threats to the American economy.

The S&P 500 experienced a 0.4% increase, recovering from a two-day decline that had halted its nine-day upward trend. The Dow Jones Industrial Average advanced by 284 points, equating to a 0.7% rise, while the Nasdaq composite climbed by 0.3%.

Stock market indices fluctuated throughout the day, with the Dow experiencing a brief surge of up to 400 points, fueled by optimism that the United States and China might be initiating preliminary steps towards a trade agreement to safeguard the global economy. The world's two largest economies have been progressively imposing tariffs on each other's goods in an escalating trade conflict, raising concerns that this could trigger a recession unless trade restrictions are eased.

The announcement of high-level discussions 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 decrease his 145% tariffs on Chinese imports as a prerequisite for negotiations. China has stipulated the de-escalation of tariffs as a condition for trade talks, which these meetings are intended to facilitate.

The uncertainty about tariffs that comes and goes has caused big changes in the U.S. economy, like a sudden increase in imports as people tried to avoid paying tariffs. Even with these changes, and surveys showing that people in the U.S. are feeling much less hopeful about the future, the Fed said it still thinks the economy is doing well right now.

Federal Reserve Chairman Jerome Powell said this gives the central bank time to wait before changing interest rates, even though President Trump wants faster cuts to help the economy.

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

This is especially evident as the trade dispute appears to be entering a new phase, according to Powell, with the United States engaging in increased trade discussions with other nations.

The Federal Reserve acknowledged the mounting risks to the economy stemming from tariffs, noting their potential to both undermine employment growth and fuel inflationary pressures.

Powell indicated that persistent significant tariff hikes would likely result in heightened inflation, diminished economic expansion, and increased joblessness.

This could eventually lead to a very bad situation for the Fed called "stagflation." This happens when the economy isn't growing, but prices are still going up a lot. This mix is difficult because the Fed doesn't have good ways to fix it. For example, if the Fed tried to lower interest rates to help the economy and create jobs, it might make inflation even worse. But raising rates would do the opposite.

Concurrently, major American corporations are projecting larger profits for early 2025 than predicted by financial analysts.

Following better-than-expected profits, an upward revision of its profit projection, and the acquisition of over a million new streaming subscribers, The Walt Disney Co. saw its share price surge by 10.8%.

Nevertheless, corporations persist in highlighting how economic ambiguity complicates their financial projections.

Shares in chipmaker Marvell Technology plummeted 8% following its decision to defer its investor day from June to an unspecified future date, citing economic unpredictability.

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

In the bond market, Treasury yields declined after the Federal Reserve's announcement. The yield on the 10-year Treasury decreased to 4.27% from 4.30% at the close of trading on Tuesday.

European markets largely declined, while Asian markets saw gains, with indexes in Hong Kong and Shanghai increasing by 0.1% and 0.8% respectively, following Beijing's implementation of interest rate reductions and other measures aimed at bolstering the Chinese economy and markets amid the adverse impact of elevated tariffs on the country's exports.