United States stock indices experienced a marginal increase on Wednesday following the Federal Reserve's decision to maintain its primary interest rate at its current level, a move largely anticipated, while simultaneously issuing a caution regarding the escalating risks confronting the U.S. economy.

The S&P 500 advanced by 0.4%, recovering from a two-day decline that had ended a nine-day period of gains, while the Dow Jones Industrial Average increased by 284 points, equivalent to 0.7%, and the Nasdaq composite saw a 0.3% rise.

Throughout the day, market indices fluctuated considerably, with the Dow briefly surging by as much as 400 points, fueled by optimism that the United States and China might be initiating preliminary steps towards a trade agreement capable of safeguarding the global economy. The world's two foremost economies have been progressively imposing escalating tariffs on each other's imports in an intensifying trade conflict, sparking concerns that this could precipitate a recession unless they facilitate greater trade liberalization.

The news about important talks between the U.S. and China in Switzerland this weekend made people more hopeful at first. However, President Trump later said he would not lower the taxes on Chinese goods to start the talks. This reduced some of the hope because China wants the taxes to be lower before they negotiate, and these meetings are meant to help start those negotiations.

The inconsistent nature of tariff uncertainty has contributed to marked fluctuations in the U.S. economy, notably a surge in imports intended to pre-empt tariffs.

According to Fed Chair Jerome Powell, this situation provides the central bank with sufficient time to delay potential adjustments to interest rates, despite Trump's advocacy for swifter reductions to stimulate economic growth.

"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 really happens in Trump's trade war and if his tariffs, which were much tougher than people thought, will work as planned.

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

Indeed, the Federal Reserve acknowledged the escalating economic risks stemming from tariffs, which hold the potential to simultaneously undermine employment and fuel inflationary pressures.

Powell stated, “Should the significant tariff hikes announced persist, they will likely lead to increased inflation, slower economic growth, and higher unemployment.”

This scenario could ultimately culminate in a dire situation for the Fed, termed "stagflation," characterized by economic stagnation coupled with persistent high inflation. This confluence is particularly problematic as the Fed lacks effective instruments to address it. For instance, an attempt to stimulate the economy and job market through interest rate reductions could exacerbate inflationary pressures, whereas increasing rates would yield the contrary outcome.

Concurrently, major American corporations are reporting more substantial profits for the beginning of 2025 than analysts had projected.

The Walt Disney Co.'s stock went up by 10.8% because the company did much better than expected with its profits, increased its future profit prediction, and got over a million new streaming customers.

Nonetheless, companies persist in expressing concerns regarding how economic instability impedes their ability to accurately predict their financial performance.

Chipmaker Marvell Technology experienced a significant downturn of 8% following the postponement of its investor day from June to an unspecified future date, citing the prevailing economic uncertainty as the reason.

In summary, the S&P 500 experienced a gain of 24.37 points, reaching 5,631.28, while the Dow Jones Industrial Average increased by 284.97 points to 41,113.97, and the Nasdaq composite advanced by 48.50, closing at 17,738.16.

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

European markets generally declined, while their Asian counterparts advanced, 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 designed to bolster the Chinese economy and financial markets amidst the impact of escalated tariffs imposed by Trump on the country's exports.