Stocks fell on Wednesday, as oil prices spiked ahead of the Federal Reserve 's latest interest rate decision. Chip stocks also extended their decline. The Dow Jones Industrial Average traded 757 points lower, or 1.5%. The S&P 500 shed 0.7%, while the Nasdaq Composite slid 0.8%. Oil prices extended their gains after President Donald Trump told a Fox News reporter that the U.S. will be hitting Iran "hard" in response to the surprise attacks. West Texas Intermediate crude futures advanced 6.9% to trade at $89.88 a barrel. This comes after U.S. Central Command said in a social media post late Tuesday that Islamic Revolutionary Guard Corps forces launched "multiple ballistic missiles in an attempted surprise attack on U.S. forces based in the Middle East." The missiles were successfully intercepted, Centcom said. Investors are also looking ahead to the Fed's policy decision and subsequent press conference with Chairman Kevin Warsh on Wednesday afternoon. Fed funds futures traders are pricing in a nearly 70% likelihood that the central bank holds rates steady at the current targe range of 3.5% to 3.75%, according to CME's FedWatch tool. "Any Fed surprise could cause this sell off to accelerate," said Jay Woods, chief market strategist at Freedom Capital Markets. "The news today unfortunately turned back to Iran, and that's something we did not anticipate when the day began." Semiconductors fell, with the iShares Semiconductor ETF (SOXX) last down more than 4%. Chip stocks are coming off four straight losing sessions, down 10% week to date, amid growing anxiety over the return on massive artificial intelligence spending, as well as fears of greater competition from China. Micron Technology dipped 5%, while Advanced Micro Devices slipped more than 5%. Shares of KLA dropped more than 8%. Shares of Procter & Gamble fell more than 3%, after the consumer goods company missed revenue expectations in its latest quarter. Ford Motor shares jumped 5% after the automaker beat earnings expectations and lifted its 2026 forecast. Stocks are vulnerable to a reversal that investors aren't appreciating, with inflation and higher interest rates posing a risk even as the earnings picture remains strong, according to Barclays. "Despite renewed tensions in the US-Iran conflict, investors remain largely sanguine on inflation risks, as reflected in rising oil short positions and muted inflows into TIPS," the firm's Emmanuel Cau wrote on Wednesday. "Yet, financial conditions continue to tighten, with Fed rate hike expectations moving higher and US real yields approaching levels that have historically become a headwind for equities," he added. Semiconductors extended their decline Wednesday, with the iShares Semiconductor ETF last down 3.8%. That brought its week to date losses to 10.4%. The semiconductor sell-off is a buying opportunity as AI demand remains strong, according to a note from Truist Securities. The firm's feedback from industry contacts was positive despite the Philadelphia Semiconductor Index falling 25% from its June 22 peak. "Feedback remains effervescent, so we continue our positive view on semis. Favor core AI suppliers for long-term growth; favor 'fragile' suppliers for...
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