Dow Jones falls 1,100 points in worst day since April 2025 on inflation fears, oil jump

Benchmark indices on Wall Street tanked on Wednesday, July 29, after the US Federal Reserve's interest rate decision sent bond yields soaring and led the market to believe that inflation could remain higher for longer.

The Dow Jones fell over 1,100 points to mark its worst day since April 2025, the period of US President Donald Trump's first tariff tantrum. The S&P 500 fell 1.5%, while the Nasdaq Composite fell 1.7% as well. Home to the country's chip companies, Nasdaq 100, fell over 2% after the Fed decision, taking the index into a "technical correction" territory, meaning a drop of over 10% from its peak.

Why Did The US Market Fall On Wednesday?

In a 9-3 decision overnight, the Federal Open Markets Committee (FOMC) left interest rates unchanged at 3.5% - 3.75%. Regional Fed Presidents Lorie Logan (Dallas), Neel Kashkari (Minneapolis) and Beth Hammack (Cleveland) dissented against the Status Quo decision.

However, it is the subsequent commentary from Fed Chair Kevin Warsh that spooked the street. While the Fed statement offered nothing forward looking, Warsh said that the Fed 'does not have a magic wand' to bring inflation down in days or weeks. He went on to add that the fight will be a tough one and a long one too.

The new Fed Chair, in his second policy at the helm, reiterated that the Fed will do everything to bring price stability back. However, the street, who sought some more clarity on the future of rates, did not get any.

As a result of the Fed policy, the US 10-year bond yield returned to the 4.7% level but the bigger impact was seen on the longer tenor 30-year note, yields on which surged to 5.2%, the highest level since 2007. The US Dollar fell, while Gold and Silver saw modest gains.

Mixed Results From Microsoft, Meta

AI giants Microsoft and Meta both reported results after market hours on Wednesday which sent stocks in opposite directions.

Microsoft's results were ahead of expectations, as was its guidance for the ongoing quarter. The company made no changes to its capex plans for the year, keeping them unchanged at $175 billion.

Although the company saw a 23% drop in free cash flow, it reiterated that it will remain cash flow positive through financial year 2027. The street appreciated that, and sent the stock 9% higher in extended trading.

On the flip side, Meta missed expectations on the Earnings Per Share (EPS) front and its guidance for the current quarter also turned out to be subdued. The Daily Active People metric was also lower than expectations, while its Free Cash Flow was down to less than $1 billion.

Meta now expects to spend between $130 billion to $145 billion this year, compared to $125 billion to $145 billion projected earlier.

The stock fell as much as 10% in extended trade, before recovering some of those losses to trade 6% lower.

As a result of the surge in Microsoft shares, the Nasdaq futures are up 170 points this morning. The Dow futures too are up 150 points after the overnight rout.

Today's session on Wall Street will see Apple, Amazon report results after market close, while jobless claims, Q2 GDP print and the PCE inflation data will be reported before trading begins.