Key Highlights

● Stocks swung during the Fed announcement and press conference.

● All three major indexes finished higher by the close.

● The rally was narrow, with rate-sensitive sectors lagging.

● After-hours earnings reversed some of the day's calm.

The Federal Reserve's decision did not produce a big move in stocks by the closing bell, but getting there was a bumpier ride. All three major indexes swung after the announcement and during Chair Kevin Warsh's press conference before finishing higher, with the S&P 500 posting its third straight gain.

The Fed left its benchmark rate range unchanged, as expected, but the details leaned hawkish, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting in favor of a hike.

What Caused the Swings

The statement upgraded growth, saying economic activity is expanding at a strong pace, while adding that inflation remains elevated. Bonds reacted sharply, with the two-year Treasury yield spiking right after the decision before drifting lower, while long-dated yields moved the other way, posting their largest daily gain in a month.

Warsh said the Fed has made clear its willingness and readiness to act, and odds of a December hike rose afterward.

Why Stocks Recovered

The decision was largely expected, with Carson Group's Ryan Detrick saying the Fed didn't throw any curveballs. Earnings and AI spending provided support, with Oracle jumping after its investor day and Vertiv soaring on strong results and raised guidance.

The calm did not last into the evening, however, as Microsoft rose in extended trading after an Azure beat while Alphabet slid sharply after missing on earnings, and the rally was narrow overall, with the equal-weight S&P 500 slipping slightly.