Wall Street slides as Fed keeps interest rates unchanged and AI stocks drop

Wall Street closed sharply lower after the Federal Reserve kept US interest rates unchanged, while continued selling in AI-related stocks added pressure to markets ahead of earnings from Microsoft and Meta Platforms.

According to Reuters, the Fed left its benchmark interest rate unchanged at 3.50 percent to 3.75 percent, although three members of the policy-setting committee favoured a quarter-point increase.

The S&P 500 fell 1.52 percent, the Nasdaq dropped 1.74 percent and the Dow Jones Industrial Average lost 2.19 percent.

Investors largely expected the Fed to leave rates unchanged but remain concerned that inflation is still above the central bank's target.

Ryan Detrick, chief market strategist at Carson Group, told Reuters: "The Fed held pat, as expected. The bigger question now though becomes, how much pressure will they have to hike in September?”

“Inflation is running hot and with surging crude oil, the market expects the next hike to indeed be in September."

AI-related shares remained under pressure as investors questioned heavy spending on artificial intelligence infrastructure.

Meta Platforms fell in after-hours trading after raising its 2026 capital spending forecast, while Microsoft edged higher after reporting stronger-than-expected cloud revenue growth.