NEW YORK MARKET CLOSE: Fed holds, Brazil and Inida hit with tariffs

(Alliance News) - Shares ended mostly lower in New York on Wednesday as the Federal Reserve elected to hold interest rates, while the Trump administration hit Brazil and India with a fresh tariff set of tariffs.

On Wall Street, the Dow Jones Industrial Average closed down 171.71 points, 0.4%, at 44,461.28. The S&P 500 edged down 7.96 points, 0.1%, to 6,362.90. The Nasdaq Composite ended up 31.38 points, 0.2%, at 21,129.67.

The Federal Open Market Committee on Wednesday voted to maintain rates at the 4.25%-4.50% range, its fifth straight hold.

Two members of the FOMC dissented, however with governors Christopher Waller and Michelle Bowman backing a quarter-point cut.

Speaking with the media, Fed chair Jerome Powell said both internal and internal estimates on the likely effective levels of tariffs have been stable.

At the same time, Powell said he "feels like there's much more to come".

"You have to think of this as still quite early days," Powell said about the new trade policy, adding there's a "long way to go."

Powell explained the committee's rationale: "Our obligation is to keep longer term inflation expectations well anchored and to prevent a one time increase in the price level from becoming an ongoing inflation problem. Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen."

In its statement, the FOMC said uncertainty about the economic outlook remains elevated and that recent indicators suggest that growth of economic activity moderated in the first half of the year.

Powell said of the split decision: "This was quite a good meeting, all around the table, where people thought carefully about this and put their positions out there".

"On the dissents, what you want from everybody - and also from a dissenter - is a clear explanation of what your thinking is," he said. "And we had that today."

Morgan Stanley said despite the dissents, the Fed's statement showed no tilt toward rate cuts with inflation "somewhat elevated", the labor market "solid", and unemployment "low".

The Bureau of Labor Statistics on Wednesday said the US economy expanded 3.0% quarter-on-quarter on an annualised basis in the three months to June. The reading topped an FXStreet cited forecast of a 2.4% rise and follows a first quarter which saw the US economy shrink 0.5%.

"The increase in real GDP in the second quarter primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending. These movements were partly offset by decreases in investment and exports," the BEA said.

The annualised calculation shows how much the economy would expand if that quarterly pace of growth continued for a whole year, according to the BEA.

Year-on-year, the US economy rose 2.0% in the second quarter, matching the pace of growth seen in the first quarter

The BEA said the personal consumption expenditures inflationary gauge rose 2.1% quarter-on-quarter in the second quarter, easing from a 3.7% rise in the first.

Excluding food and energy, the core PCE index rose 2.5% on-quarter, cooling from 3.5%. Core PCE is the Federal Reserve's preferred inflationary gauge. The core PCE reading topped the FXStreet cited consensus of 2.4%.

Thursday has the monthly PCE reading for June. Annual core PCE growth of 2.7% is expected, in line with May, according to FXStreet.

The dollar strengthened on the news, with the pound at USD1.3247 late Wednesday, down from USD1.3356 at the New York close on Tuesday. The euro eased to USD1.1427 from USD1.1550. Against the yen, the dollar was at JPY149.38 compared to JPY148.47 on Tuesday.

Late Wednesday, the US 10-year Treasury was quoted at 4.37%, widened from 4.32% on Tuesday. The yield on the US 30-year Treasury was at 4.90%, widened from 4.86% on Tuesday.

ADP on Wednesday said private sector employment grew by 104,000 in July, after shrinking by 23,000 in June.

The latest reading topped the FXStreet-cited consensus of 78,000. The June reading was upwardly revised from an initially reported 33,000 fall.

ADP said year-on-year pay growth was 4.4% for job-stayers, cooling from 4.5% in June, and 7.0% for job-changers, in line with the rise seen in June.

US President Donald Trump said Wednesday that imports from India will face 25% tariffs, while also announcing an unspecified "penalty" over New Delhi's purchases of Russian weapons and energy.

Despite the tariff threat, New Delhi said it was committed to continuing negotiations on "a fair, balanced and mutually beneficial bilateral trade agreement."

Trump also raised the tariff rate on Brazilian products to 50% from 10%, in an effort to quelled the country's prosecution of former president Jair Bolsonaro for an attempted coup.

The Brazilian government's "politically motivated persecution, intimidation, harassment, censorship, and prosecution of (Bolsonaro) and thousands of his supporters are serious human rights abuses that have undermined the rule of law in Brazil," the White House said in a fact sheet announcing the move.

It also cited Brazil's "unusual and extraordinary policies and actions harming US companies, the free speech rights of US persons, US foreign policy, and the US economy," and singled out Brazilian Supreme Court Justice Alexandre Moraes who is overseeing the trial against Bolsonaro.

Amid sharp criticism of the US-EU trade deal in Europe, French President Emmanuel Macron said Wednesday that the block had not been "feared" enough in negotiations.

"It's not the end of it," Macron told ministers during a cabinet meeting, pledging to be "firm" in follow-up talks.

Palo Alto Networks on Wednesday said it would acquire Israeli identity security provider CyberArk Software in a USD25 billion cash-and-stock deal.

The acquisition is expected to close in Palo Alto's financial 2026, with the "strategic combination" marking its formal entry into Identity Security.

It aims to establish the sector as a "core pillar" of its multi-platform strategy.

Palo Alto said the deal is accretive to revenue growth and margin immediately post-close and to free cash flow per share in financial 2028. It sees significant revenue synergy potential, including cross-selling.

Palo Alto shares shed 5.6%. CyberArk gained 0.2% in New York.

Verisk Analytics shares lost 6.3% on Wednesday as the company reported an 18% drop in second quarter net income to USD253 million.

Second quarter revenue was USD773 million, up 7.8% on-year, while diluted adjusted earnings per share of USD1.88 came in 6.1% higher than Yahoo-cited consensus.

For 2025, Verisk raised revenue guidance to between USD3.09 billion and USD3.13 billion from USD3.03 billion to USD3.08 billion. This is 1% higher than Yahoo-cited consensus.

However, it narrowed its diluted adjusted EPS outlook to between USD6.80 and USD7.00 from USD6.80 to USD7.10.

The company also announced a USD2.35 billion acquisition of SaaS platform developer for the construction industry, AccuLynx.

It follows the USD162.5 million acquisition of SuranceBay announced last week.

American Electric Power shares gained 3.7% on Wednesday as it eyed the upper end of 2025 guidance following a strong second quarter.

Earnings surged to USD1.23 billion or USD2.29 per share, from USD340.3 million or USD0.64 per share a year prior. Revenue climbed to USD5.09 billion from USD4.58 billion in the second quarter of 2024.

AEP said it expects full-year operating earnings per share at the upper end of the USD5.75 to USD5.95 range previously communicated.

The company expects to unveil a new five-year capital plan of around USD70 billion this autumn, up from the current USD54 billion investment strategy.

GE Healthcare Technologies announced increased forecast estimates for the full year, following a "strong earnings performance" in the first two quarters.

Net attributable income rose 15% to USD486 million in the second quarter of 2025, from USD428 million the prior year.

Total revenue increased 3% or 2% on an organic basis to USD5.01 billion from USD4.84 billion, "driven by strength in the US and Europe, the Middle East and Africa", GE Healthcare said. Free cash flow was USD7 million, against negative USD182 million.

The adjusted earnings before interest and tax margin decreased to 14.6% to 15.3%. The firm said it was "impacted by tariffs, [but] partially offset by benefits from productivity and volume".

Despite beats on revenue and adjusted EPS, shares closed down 7.8% as adjusted Ebitda came in 13.5% below analyst estimates.

Following earnings after the bell on Tuesday, Visa eased 0.1%, Logitech slipped 3.0%, Starbucks closed down 0.2% and Mondelez fell 6.6%. Booking Holdings gained 0.4%.

Gold was quoted at USD3,273.25 an ounce late on Wednesday, down from USD3,325.11 on Tuesday.

Brent was quoted at USD73.53 a barrel on Wednesday, up from USD72.80 on Tuesday. West Texas Intermediate rose to USD70.38 from USD69.47.

In Europe, the FTSE 100 closed up marginally in London. The CAC 40 in Paris firmed 0.1%, as did the DAX 40 climbed in Frankfurt.

In Asia, the Nikkei 225 eased less than 0.1% in Tokyo. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng Index in Hong Kong lost 1.4%. The S&P/ASX 200 gained 0.6% in Sydney.

Thursday's corporate calendar had earnings from Illumina, ICE and MercadoLibre. Amazon and Apple report.

The global economic diary has US initial jobless claims and the Fed's preferred PCE inflation gauge.

By Aidan Lane, Alliance News reporter

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