U.S. stock markets closed sharply lower on July 29 as the Federal Reserve opted to maintain interest rates in the 3.5% to 3.75% range, while AI-related chip stocks continued to weigh on investor sentiment ahead of key earnings reports. The Nasdaq 100 index, which tracks the largest non-financial firms on the Nasdaq exchange, fell 2.1%, extending a decline that has pushed it down 11% from its June record high.
The Federal Open Market Committee’s decision to hold rates steady was largely anticipated, although three of the 12 members dissented, favoring a 0.25 percentage point increase at this meeting. Inflation remains elevated and above the central bank’s target for over five years, exacerbated recently by rising fuel and food prices linked to the ongoing conflict in the Middle East.
“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,” said Ryan Detrick, chief market strategist at Carson Group.
Investors exhibited caution toward companies heavily investing in artificial intelligence technologies, concerned about escalating capital expenditures potentially undermining profitability and free cash flow. Meta Platforms’ shares dropped 4% in after-hours trading following an upward revision of its 2026 capital expenditure forecast to between $130 billion and $145 billion, up from the previous range of $125 billion to $145 billion.
In contrast, Microsoft shares rose 0.6% after the company reported quarterly cloud revenue exceeding Wall Street estimates, signaling the benefits of its extensive AI infrastructure investments. Nonetheless, competition from Chinese firms is intensifying, with advancements in chip technology and the release of lower-cost AI models posing challenges for U.S. companies.
Amid these pressures, AI chipmakers suffered losses as well. South Korea’s SK Hynix saw its shares fall 10% despite a sixfold increase in quarterly profits, which disappointed some investors. AI infrastructure provider Vertiv declined 17% after failing to meet revenue expectations for the quarter.
Major U.S. indexes ended the session with the S&P 500 down 1.52% at 7,316.15 points, the Nasdaq Composite falling 1.74% to 24,442.94, and the Dow Jones Industrial Average losing 2.19%, settling at 51,594.14. Sector performance was broadly negative, with industrials declining 3.24% and information technology down 2.5%.
Despite the market downturn, expectations for strong corporate earnings remain. Analysts anticipate a roughly 40% increase in aggregate second-quarter earnings for S&P 500 companies compared to a year earlier, with AI-related stocks largely driving this growth.
Meanwhile, Ford Motor’s shares rose 2.1% after the automaker raised its annual profit outlook for the second time this year. Conversely, HVAC company Lennox faced a 21% drop in its stock after lowering its annual profit forecast.
Energy markets reflected geopolitical concerns as Brent crude futures surged 7.91% to $90.74 per barrel, while West Texas Intermediate crude climbed 6.56% to $84.46 amid rising oil prices linked to global instability.