NEW YORK, May 7 (Reuters) - The Dow was higher on Wednesday while the S&P 500 and Nasdaq declined in choppy trading, after the Federal Reserve kept U.S. interest rates unchanged, in a widely anticipated move.
In keeping rates steady, the central bank said the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the Fed grapples with the impact of Trump administration tariff policies.
After a brief move lower saw the Nasdaq fall as much as 1.1% on the day, stocks reversed course and the Dow Jones Industrial Average (.DJI), rose 132.90 points, or 0.33%, to 40,961.90, the S&P 500 (.SPX), lost 11.46 points, or 0.20%, to 5,595.45 and the Nasdaq Composite (.IXIC), lost 119.54 points, or 0.68%, to 17,568.94.
"Clearly, the statement is trying to send a message to the White House that their recent actions have made the economic environment more difficult," said Ellen Hazen, chief market strategist at F.L. Putnam Investment Management in Lynnfield, Massachusetts.
"They're saying that the risk of higher employment has risen, the risk of higher inflation has risen. And they didn't specifically attribute it to the tariffs, but I think anybody looking at that is going to understand that that's what they mean."
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Investors will closely monitor commentary from Fed Chair Jerome Powell for insight on how policy makers plan to navigate through President Donald Trump's global trade war.
Markets are still largely pricing in a rate cut of at least 25 basis points from the Fed at its July meeting, according to data compiled by LSEG.
The three main indexes were initially higher in early morning trading, a day after Washington announced that representatives of the two countries would meet over the weekend in Switzerland for ice-breaker trade discussions following weeks of tit-for-tat tariffs between the United States and China.
The Trump administration has said potential deals with major trading partners are underway, but the markets are yet to see tangible results on that front.
But Trump said shortly before the Fed statement he was not open to pulling back the 145% tariffs that had been announced, which some analysts attributed to the brief pullback in stocks.
Markets have been whipsawed in recent weeks since the announcement of the tariffs in early April, with the S&P 500 dropping nearly 15% in the days after, only to recover nearly all of the declines.
The Dow was boosted by a jump of about 10% in Walt Disney's (DIS.N), stock after the streaming firm's quarterly results topped Street expectations.
The Nasdaq was lower in part due to a drop of more than 8% in Google-parent Alphabet(GOOGL.O), which also served to pull the S&P 500 communication services sector (.SPLRCL), down 2.4% as the worst performer on the session.
A report said iPhone-maker Apple (AAPL.O), was exploring the option of adding artificial-intelligence search options to its web browser, citing an executive. Apple's shares were last off 2%.
Uber (UBER.N), shed 2.1% as the ride-hailing company missed quarterly revenue expectations.
CrowdStrike (CRWD.O), stumbled 5.3% after the cybersecurity company reiterated its fiscal 2025 and 2026 forecasts and announced a plan to cut jobs.
Advancing issues outnumbered decliners by a 1.31-to-1 ratio on the NYSE, while decliners outpaced advancers by a 1.05-to-1 ratio on the Nasdaq.
The S&P 500 posted 17 new 52-week highs and eight new lows, while the Nasdaq Composite recorded 49 new highs and 96 new lows.
Reporting by Chuck Mikolajczak, additional reporting by Purvi Agarwal and Johann M Cherian in Bengaluru; Editing by David Gregorio
