Dow drops 450 points as Fed decision, chip selloff weigh on US stocks

US stocks opened lower on Wednesday as investors awaited the Federal Reserve's latest interest rate decision while monitoring renewed geopolitical tensions in the Middle East and another round of major technology earnings.

Dow Jones Industrial Average fell more than450 points, pressured in part by weakness in Procter & Gamble after the consumer products company missed quarterly revenue expectations.

The S&P 500 was little changed, while the Nasdaq Composite slipped about 0.19%.

Markets remained focused on whether the Federal Reserve would leave interest rates unchanged and on any signals from Chair Kevin Warsh regarding the path of monetary policy.

At the same time, investors continued to assess whether heavy spending on artificial intelligence infrastructure by major technology companies would translate into stronger financial returns.

Chip stocks remain under pressure ahead of Big Tech earnings

Semiconductor stocks continued to struggle after several days of selling as investors questioned the sustainability of AI-related capital spending and weighed rising competition from China.

The weakness extended from Asia into US trading after South Korean chipmaker SK Hynix reported quarterly results that failed to meet elevated investor expectations.

US-listed shares of SK Hynix was up by 0.56%, while Applied Materials declined more than 1.7% and Sandisk slipped over 1.14%. Nvidia fell 0.32%, while Intel edged 0.27% higher.

The iShares Semiconductor ETF remained under pressure after four consecutive losing sessions and was down nearly 7% for the week.

Technology stocks have been weighed down by concerns that billions of dollars invested in AI infrastructure may take longer to generate returns.

Investors are now awaiting quarterly earnings from Microsoft and Meta Platforms after Wednesday's closing bell, followed by Amazon and Apple later in the week.

Their results are expected to provide fresh insight into AI investment plans and demand for semiconductor infrastructure.

Despite the weakness in technology shares, Seagate Technology gained 5.6% after issuing quarterly guidance above market expectations.

Ford Motor climbed 4.3% after raising its full-year profit outlook for the second time this year, while Procter & Gamble fell more than 3.9% after forecasting slower revenue growth.

The second-quarter earnings season has continued to produce broadly positive results, with more than 85% of S&P 500 companies that have reported earnings exceeding analyst expectations, according to LSEG data.

That compares with a historical average of about 68%.

Fed policy decision and oil prices remain in focus

The Federal Reserve is scheduled to announce its policy decision Wednesday afternoon, with investors widely expecting interest rates to remain unchanged.

Fed funds futures indicate markets continue to assign a high probability that policymakers will hold rates steady this week, although traders still expect at least one quarter-point rate increase later this year.

Attention will also center on Chair Kevin Warsh's comments for clues about inflation, economic conditions and the future direction of monetary policy, particularly as elevated energy prices continue to influence inflation expectations.

Oil prices climbed sharply after President Donald Trump said the United States would respond to attacks on US forces in the Middle East.

West Texas Intermediate crude rose nearly 7% to around $89.90 per barrel after US Central Command reported that multiple ballistic missiles launched toward US forces were intercepted.

The rise in oil prices added another layer of uncertainty for markets already balancing inflation risks with expectations for future monetary policy.