Late rally lifts stocks after Fed holds rates steady

US stocks advanced in choppy trading, buoyed as semiconductor stocks rallied late on a report that regulations on artificial intelligence chips would be loosened.

For most of Wednesday's session, stocks bounced around, and trading remained choppy after the Federal Reserve kept US interest rates unchanged in a move that market participants expected.

Close to the closing bell, stocks rallied as chipmakers jumped after Bloomberg reported President Donald Trump's administration plans to rescind artificial intelligence chip curbs. The report was confirmed by a Commerce Department spokesperson. The PHLX semiconductor index ended 1.7 per cent higher after falling as much as one per cent on the day.

Earlier, the Fed kept rates steady, with the central bank saying the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the Fed grapples with the impact of Trump's tariff policies.

Trading in stocks was uneven following the Fed statement, until the boost from chipmakers.

"Clearly, the statement is trying to send a message to the White House that their recent actions have made the economic environment more difficult," said Ellen Hazen, chief market strategist at FL Putnam Investment Management in Lynnfield, Massachusetts.

"They're saying that the risk of higher unemployment has risen, the risk of higher inflation has risen. And they didn't specifically attribute it to the tariffs, but I think anybody looking at that is going to understand that that's what they mean."

The Dow Jones Industrial Average rose 284.97 points, or 0.7 per cent, to 41,113.97, the S&P 500 gained 24.37 points, or 0.43 per cent, to 5,631.28 and the Nasdaq Composite gained 48.50 points, or 0.27 per cent, to 17,738.16.

The Dow was boosted by a 10.8 per cent jump in Disney shares after the entertainment company's quarterly results topped Street expectations.

After the central bank's decision on rates, Fed Chair Jerome Powell acknowledged uncertainty has soured sentiment among people and businesses, but the economy itself is still healthy. In addition, he said rate cuts are possible if supported by economic data but the Fed cannot make preemptive policy changes until there is more clarity.

Markets are still largely pricing in a rate cut of at least 25 basis points from the Fed at its July meeting, according to LSEG data.

Market sentiment was boosted early in the session, a day after Washington announced representatives of the US and China would meet over the weekend in Switzerland for ice-breaker trade discussions following weeks of tit-for-tat tariffs between the economic heavyweights.

The Trump administration has said potential deals with major trading partners are underway, but markets have yet to see talks bear fruit.

Trump said shortly before the Fed statement he was not open to pulling back the 145 per cent tariffs that had been announced.

Financial markets have been whipsawed in recent weeks since Trump announced the tariffs in early April, with the S&P 500 dropping nearly 15 per cent in the days after, only to recover nearly all of the declines.

During most of the session, the Nasdaq was lower in part due weakness in Google-parent Alphabet, which closed down more than seven per cent and served to pull the S&P 500 communication services sector down 1.8 per cent as the worst performer on the session.

A report said iPhone-maker Apple was exploring the option of adding artificial-intelligence search options to its web browser, citing an executive. Apple's shares ended 1.1 per cent lower.

Advancing issues outnumbered decliners by a 1.56-to-1 ratio on the NYSE, and by a 1.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 18 new 52-week highs and eight new lows, while the Nasdaq Composite recorded 52 new highs and 114 new lows.

Volume on US exchanges was 15.43 billion shares, compared with the 17.55 billion average for the full session over the last 20 trading days.