U.S. stocks posted modest gains on Wednesday following the Federal Reserve's decision to maintain its key interest rate, a move anticipated by most, though the central bank also highlighted escalating risks to the American economy.

The S&P 500 index advanced by 0.4%, recovering from a two-day decline that had concluded its nine-day period of gains. The Dow Jones Industrial Average increased by 284 points, equating to a 0.7% rise, while the Nasdaq composite experienced a 0.3% uptick.

Stock markets went up and down a lot during the day. The Dow even went up by 400 points for a short time. This happened because people hoped the US and China were starting to work towards a trade agreement. This agreement could help protect the world's economy. The US and China are the two biggest economies, and they have been putting more and more taxes on each other's goods in a growing trade war. People are worried this could cause a recession if they don't allow trade to happen more easily.

The news about important talks between the U.S. and China in Switzerland this weekend made people more hopeful. However, this hope decreased a bit after President Donald Trump said he would not lower his 145% taxes on Chinese products to start the talks. China has said that lowering these taxes is necessary for trade discussions, which these meetings are meant to help start.

The intermittent tariff-related uncertainty has contributed to considerable fluctuations in the U.S. economy, notably a surge in imports aimed at avoiding tariffs. Despite these swings and surveys indicating increased pessimism among U.S. households regarding the future, the Fed maintains its assessment that the economy is presently operating at a robust rate.

Federal Reserve Chairman Jerome Powell indicated this affords the central bank a period to defer any potential adjustments to interest rates, despite President Trump's advocacy for more rapid reductions aimed at stimulating the economy.

Powell acknowledged the considerable unknowns, indicating that like the broader financial community and the global economy, the Federal Reserve is awaiting the actual consequences of Trump's trade policies and whether the unexpectedly severe tariffs will impact as intended.

This is particularly true now that the trade dispute appears to be transitioning into a new stage, according to Powell, where the United States is engaging in more trade negotiations with other nations.

Admittedly, the Federal Reserve acknowledged the escalating economic risks posed by tariffs, which could potentially undermine employment and fuel inflation.

Powell said that if the big increases in tariffs that have been announced continue, they will probably cause inflation to go up, economic growth to slow down, and unemployment to increase.

In the end, this could lead to a very bad situation for the Federal Reserve, called "stagflation." This is when the economy is not growing, but prices are still going up a lot. This mix is difficult because the Fed does not have good ways to fix it. For example, if the Fed tried to lower interest rates to help the economy and create jobs, it could make inflation even worse. Increasing interest rates would have the opposite effect.

Meanwhile, major US corporations persist in generating larger profits for the beginning of 2025 than analysts had anticipated.

Shares in The Walt Disney Co. soared by 10.8% following its substantial outperformance of analysts' profit expectations, an upward revision to its profit outlook, and the acquisition of over a million new streaming subscribers.

Nonetheless, companies persist in expressing concerns regarding how economic uncertainty complicates their ability to predict their financial performance.

Chipmaker Marvell Technology saw its stock decline by 8% after rescheduling its investor day from June to an unspecified future date, citing economic volatility.

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

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

European markets predominantly experienced declines, whereas their Asian counterparts saw gains. Notably, indexes in Hong Kong advanced by 0.1% and in Shanghai by 0.8%, following Beijing's implementation of interest rate reductions and other measures aimed at bolstering the Chinese economy and markets amidst the impact of increased tariffs imposed by Trump on the nation's exports.