Fed holds rates, stocks rise a third day as long yields climb

Chipmakers lifted the market higher on Wednesday as the Federal Reserve held its benchmark rate at 3.75% to 4%, six weeks after its first increase since 2023. Two officials voted for another quarter-point hike. Long yields climbed on the news. Fed funds futures, which traders use to bet on the Fed’s next move, still put the odds of a December increase above 80%.

Stocks climbed for a third straight day: The S&P 500 rose 0.28% to 7,743.98, the Nasdaq Composite added 0.27% to 26,549.85 and the Dow Jones Industrial Average gained 97.53 points, or 0.19%, to 52,475.10. Long-dated Treasurys fell, pushing the 10-year yield to 5.05%, while two-year yields declined, steepening the yield curve.

Two officials wanted a rate increase

The Federal Open Market Committee, the Fed’s rate-setting panel, voted 10-2 to keep the target range for the federal funds rate, the rate banks charge one another for overnight loans, at 3.75% to 4%. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack voted to raise it by a quarter percentage point. It was Cook’s first dissent since she joined the Fed’s board in 2022, CNN reported. Hammack also voted for a hike in July.

The Fed statement said economic activity is expanding at a “strong pace,” an upgrade from “solid” in September, and that inflation “remains elevated.” It added that the committee wants more information before deciding what policy will return inflation to its 2% goal, and it ends with a pledge: “The Committee will deliver price stability.”

At his news conference, Fed Chairman Kevin Warsh said most officials believe September’s increase, the Fed’s “monetary medicine,” is starting to work, though the committee has reached no firm conclusions. Financial conditions are tighter overall, he said, but he was “unwilling and unable to call them tight.”

The Fed also said it will hold fewer policy meetings starting in 2027, Reuters reported.

Oil prices climb

West Texas Intermediate crude was up 2.1% at $101.99 as of 4:51 p.m. ET. Brent, the international benchmark, traded near $115 a barrel. Reuters tied the day's rise to a claim by Yemen's Houthis that they had hit Saudi Arabia's largest refinery, a 550,000-barrel-a-day plant. Saudi authorities had not confirmed the attack.

Canada raises interest rates

While the U.S. Federal Reserve held rates steady, Canada tightened its monetary policy, raising its overnight rate by 25 basis points to 2.5%. It did so to reduce the risk of high energy prices spreading into other prices. Canadian inflation has been around 3% since April, the Bank said, and is expected to rise to about 3.5% by year-end.

Semiconductor stocks led markets higher

State Street SPDR S&P 500 ETF ASPY rose 0.3%, a third straight gain. State Street Technology Select Sector SPDR ETF AXLK rose 0.8%, a fourth straight gain, and was the strongest of the 11 sector funds.

VanEck Semiconductor ETF ASMH rose 1.7%. In a group of 25 semiconductor funds, every one rose, by a median 2.5%.

SK hynix shares closed 10.9% higher in Seoul on Wednesday, in a session that ended before New York opened, after the company reported record third-quarter revenue of 104.6 trillion won and operating profit of 83.3 trillion won, or about $62 billion. The company set its 2026 shareholder returns, including dividends and buybacks, at about 100 trillion won, or about $75 billion. Its U.S.-listed shares rose 13%, CNBC reported. All 25 semiconductor ETFs that ETF.net tracks rose, with a median gain of 2.5%.

Yield curve steepens

Short-term Treasury yields fell and Long-term Treasury yields climbed as investors priced in higher inflation risks due to a perceived dovish fed. Every published Treasury yield from one month through two years fell, and every yield from five years and longer rose.

The two-year yield fell 3 basis points to 4.67%. The 10-year yield finished at 5.05%, up 6 basis points from 4.99% on Tuesday, and the 30-year rose 7 basis points to 5.37%.

The gap between the 10-year and the two-year widened by 9 basis points, to 38 basis points. A higher long-term yield means a higher costs for new long-term Treasury borrowing, and a lower price on bonds already issued. iShares 20+ Year Treasury Bond ETF BTLT fell 0.8%.

State Street Utilities Select Sector SPDR ETF AXLU fell 0.8%, and State Street Real Estate Select Sector SPDR ETF AXLRE fell 0.7%, the two weakest of the 11 sector funds, in a session when six of the 11 rose.

After the bell: Alphabet falls, Microsoft rises

Alphabet fell about 9% in extended trading after its third-quarter search revenue and total revenue missed analysts’ estimates, CNBC reported. Microsoft rose about 2% after beating estimates for its fiscal first quarter, and Fortinet fell 25%. Alphabet is in the communication services sector, so Communication Services Select Sector SPDR (XLC) and broad funds such as ASPY hold it; Microsoft is in the technology sector that AXLK tracks.