U.S. stock indices fell sharply on July 29, 2026, as the Federal Reserve held interest rates steady, but concerns about potential rate hikes lingered due to dissent among some committee members. Investor sentiment was further dampened by rising oil prices and long-term Treasury yields amid escalating tensions in the Middle East.
The Dow Jones Industrial Average closed down 2.19% at 51,594.14. The S&P 500 dropped 1.52% to 7,316.15, while the tech-heavy Nasdaq Composite fell 1.74% to 24,442.94.
The S&P 500 index reached its lowest level in a month. The Nasdaq Composite is now approximately 9% below its all-time high recorded in June, and the Nasdaq 100 index also fell 2.1%, widening its decline to 11% from the June peak.
Fed Holds Rates Steady; Three Members Advocate for Hike
The Federal Open Market Committee (FOMC) decided to maintain the benchmark interest rate at 3.50% to 3.75%. While this decision aligned with market expectations, three of the 12 voting members expressed dissent, advocating for a 0.25 percentage point increase, citing ongoing inflationary pressures.
Fed Chair Kevin Warsh reiterated concerns about inflation during a press conference. Consequently, the futures market reflects a roughly 60% probability that the Fed will raise rates in September.
In the bond market, long-term yields rose, with the yield on the 10-year U.S. Treasury note increasing by about 7.5 basis points to 4.679%. In contrast, the yield on the more sensitive two-year note fell by approximately 3.5 basis points to 4.242%. Concerns that rising oil prices could reignite inflation were reflected in the long-term yields.
Tech Stocks Weaken Amid AI Investment Concerns
Investor sentiment surrounding technology stocks deteriorated as major tech companies invest heavily in AI infrastructure. There are growing concerns about whether these investments will translate into actual revenue and profit growth.
Notably, SK Hynix reported a nearly sixfold increase in second-quarter operating profit compared to the previous year, but it fell short of heightened market expectations, leading to a nearly 10% drop in the South Korean stock market, which also impacted U.S. AI-related stocks. Vertiv, a provider of power and cooling infrastructure for AI data centers, saw its quarterly revenue fall short of market forecasts, resulting in a 17% decline.
Among the 11 sectors in the S&P 500, eight experienced declines. The industrial sector fell 3.24%, the largest drop, while the information technology sector decreased by 2.5%.
In individual stocks, Lennox, a heating and cooling company, plummeted 21% after lowering its annual earnings forecast. Conversely, Ford raised its annual profit outlook, resulting in a 2.1% increase, while Visa rose 0.6% after exceeding quarterly earnings expectations.
Middle East Tensions Escalate; WTI Oil Prices Surge 6.6%
International oil prices surged significantly due to renewed military clashes, including U.S. and Saudi airstrikes against pro-Iranian forces in Iraq and Iranian attacks on U.S. military bases in the region, raising concerns about potential disruptions in oil supply.
On this day, Brent crude rose by $6.65 (7.91%) to close at $90.74 per barrel. West Texas Intermediate (WTI) crude increased by $5.20 (6.56%) to $84.46 per barrel.
The significant drop in U.S. oil inventories also contributed to rising prices, with last week's figures showing a decrease of 7.2 million barrels, marking the lowest level since 2018.
* This article has been translated by AI.
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