The major averages finished sharply lower on Wednesday, with the S&P 500 (-1.5%), Nasdaq Composite (-1.7%), and DJIA (-2.2%) settling near their session lows after an initial post-FOMC relief rally ultimately gave way to renewed selling pressure.

Earlier weakness was driven by another sharp advance in oil prices and continued semiconductor selling, while the Federal Reserve's decision to leave interest rates unchanged briefly lifted growth stocks before that enthusiasm faded into the close. Crude oil futures settled $5.16 higher (+6.5%) at $84.48 per barrel following reports that the U.S. intercepted Iranian missiles targeting U.S. bases across the Middle East, with President Trump vowing retaliation. The energy sector (+2.1%) finished comfortably atop the leaderboard as a result, while the defensive consumer staples sector (+0.4%) also managed a modest gain amid the market's risk-off tone and another record close for Coca-Cola (KO 89.13, +0.86, +0.97%).

The communication services sector (+0.2%) managed to avoid a lower finish, supported by strength in Alphabet (GOOG 335.76, +3.16, +0.95%), although Meta Platforms (META 585.61, -7.80, -1.31%) traded lower ahead of its quarterly results.

This afternoon's focal point was the FOMC policy decision, which left the fed funds target range unchanged at 3.50%-3.75%, as widely expected. Unlike June's unanimous decision, however, three regional Fed presidents dissented in favor of a 25-basis point rate hike. The announcement initially fueled a broad rebound across growth-oriented stocks as investors welcomed the absence of another rate increase, lifting the Vanguard Mega Cap Growth ETF into positive territory and dramatically narrowing semiconductor losses. That momentum proved short-lived, however, as the post-FOMC rally steadily unraveled during Fed Chair Kevin Warsh's press conference, leaving the major averages back near their lows by the closing bell.

The top-weighted information technology sector (-2.5%) surrendered its post-Fed gains and finished among the session's laggards as semiconductor stocks resumed their retreat. The PHLX Semiconductor Index finished 5.3% lower, with KLA Corporation (KLAC 170.19, -20.61, -10.80%) remaining under pressure following its quarterly results and NVIDIA (NVDA 190.01, -7.00, -3.55%) ranking among the weakest-performing "Magnificent Seven" components.

SK hynix Inc.'s (SKHY 126.86, -3.31, -2.54%) U.S.-listed shares also declined despite another quarter of record results, as investors looked beyond continued strength in AI-driven HBM demand and instead focused on the company's elevated capital spending plans and aggressive capacity expansion.

The Vanguard Mega Cap Growth ETF likewise erased its afternoon rebound to finish down 1.6%.

The industrials sector (-3.2%) finished with an even wider loss as disappointing earnings from Lennox Int'l (LII 430.27, -113.84, -20.92%) and Vertiv (VRT 223.09, -46.47, -17.24%) weighed heavily on the group, while other electrical product names lagged amid the weakness in semiconductor names.

The utilities (-1.4%) and financials (-1.6%) sectors also ranked among the session's laggards.

Outside the S&P 500, the Russell 2000 (-1.6%) and S&P Mid Cap 400 (-1.7%) finished with losses comparable to those of the major averages.

Despite a brief post-FOMC rebound that temporarily lifted growth stocks and narrowed semiconductor losses, the market ultimately returned to the same themes that pressured the market throughout the morning. Higher oil prices, geopolitical uncertainty, and persistent weakness across semiconductor stocks kept broader sentiment in check, leaving attention squarely focused on quarterly results from Microsoft (MSFT 390.54, -2.81, -0.71%) and Meta Platforms (META 585.61, -7.80, -1.31%) after the close, which will provide the market's next major test of AI spending, earnings momentum, and investor sentiment. With little offsetting strength elsewhere in the market, another wave of semiconductor selling continued to weigh heavily on the major averages, leaving the Nasdaq Composite with less than half of the year-to-date gain it carried into July.

U.S. Treasuries had a mixed showing on Wednesday, as the 2-year note recorded a slim gain while longer tenors retreated, pulling back from three days of consecutive gains. The final standing was a change from the opening dynamic, which saw relative weakness up front and outperformance in the 30-year bond as the market awaited the FOMC Statement for July. The 2-year note yield settled down four basis points to 4.24%, and the 10-year note yield settled up two basis points to 4.62%. 

• Russell 2000: +17.1% YTD
• S&P Mid Cap 400: +13.0% YTD
• DJIA: +7.4% YTD
• S&P 500: +6.9% YTD
• Nasdaq Composite: +5.2% YTD

Reviewing today's data: 

• Weekly MBA Mortgage Applications Index -6.4%; Prior 1.9%