US equities edged up on Wednesday following the Federal Reserve's decision to maintain its benchmark interest rate, a move largely anticipated by the market, though the central bank simultaneously flagged increasing risks to the American economy.

The S&P 500 index advanced by 0.4%, concluding a two-day decline that had interrupted its preceding nine-day increase. The Dow Jones Industrial Average saw a rise of 284 points, equating to a 0.7% gain, while the Nasdaq composite index also moved upward by 0.3%.

Throughout the day, market indexes fluctuated significantly, with the Dow Jones briefly gaining up to 400 points on speculation that the United States and China might be initiating steps towards a trade agreement to safeguard the global economy. An escalating trade war between the world's two largest economies, marked by continuously rising tariffs on reciprocal imports, has fueled concerns of a potential 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 indicated he would not reduce the 145% tariffs on Chinese goods as a prerequisite for negotiations. China has stipulated the de-escalation of tariffs as a condition for commencing trade negotiations, which these meetings are intended to facilitate.

The uncertainty about tariffs, which has come and gone, has caused big changes in the U.S. economy. For example, there was a sudden increase in imports as people tried to avoid paying the tariffs. Even though the economy has changed a lot and surveys show that people in the U.S. are feeling much less hopeful about the future, the Fed still says the economy is growing "at a good speed" right now.

Federal Reserve Chair Jerome Powell stated that this allows the central bank to postpone potential decisions on interest rates, even though President Trump has been pushing for faster cuts to boost the economy.

Powell said they don't know much. So, like others in the financial world and around the globe, the Fed is waiting to see what really happens with Trump's trade conflict and if his tariffs, which were much stronger than expected, will have the effect he planned.

This holds especially true as the trade dispute appears to be entering a "new phase," according to Powell, in which the United States is engaging in increased trade negotiations with other nations.

Indeed, the Federal Reserve acknowledged the growing economic risks stemming from tariffs, which could simultaneously undermine employment and exacerbate inflation.

Powell stated, "Should the substantial tariff hikes recently declared remain in effect, they will likely lead to increased inflation, decelerated economic expansion, and higher unemployment."

This situation could eventually lead to a very bad economic state called 'stagflation'. This is when the economy is not growing, but prices are still going up a lot. This is a difficult problem because central banks like the Fed don't have good ways to fix it. For example, if they lower interest rates to help the economy and jobs, it could make inflation even worse. But if they raise interest rates, it would slow down the economy.

Meanwhile, major U.S. corporations are posting more substantial profits for early 2025 than projections indicated.

The Walt Disney Co.'s stock surged by 10.8% following its significant outperformance of analysts' profit expectations, an upward revision of its profit projections, and the acquisition of over a million new streaming subscribers.

Nevertheless, businesses continue to express concerns about how economic unpredictability is impeding their ability to project their financial performance accurately.

Chipmaker Marvell Technology's stock declined by 8% following its decision to reschedule its investor day from June to an unspecified future date, citing economic uncertainty.

Overall, the S&P 500 index increased by 24.37 points, reaching 5,631.28. The Dow Jones Industrial Average also saw a gain, adding 284.97 points to close at 41,113.97, and the Nasdaq composite advanced by 48.50 points, finishing at 17,738.16.

In the bond market, Treasury yields declined after the Fed's announcement. The yield on the 10-year Treasury softened to 4.27% from 4.30% late Tuesday.

European markets largely retreated, while Asian markets advanced, with indexes in Hong Kong and Shanghai climbing 0.1% and 0.8% respectively. This uptick followed Beijing's implementation of interest rate reductions and other measures aimed at bolstering the Chinese economy and markets, which have been impacted by the higher tariffs imposed by Trump, affecting the country's exports.