Oil prices jump following fighting with Iran, while US stocks sink after Fed opts not to raise rates

NEW YORK (AP) — Oil prices got back to jumping, while sinking technology stocks dragged Wall Street lower amid uncertainty about what the Federal Reserve will do to get high inflation under control. The S&P 500 fell 1.5% Wednesday after briefly erasing all of an earlier drop of 1.2%. The Dow Jones Industrial Average pulled back 2.2%, and the Nasdaq composite lost 1.7%. More drops for recent AI winners including Nvidia, Micron Technology and AMD weighed on the stock market. In oil trading, the price of Brent crude leaped 7.3% to settle above $88 per barrel.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

NEW YORK (AP) — Oil prices got back to jumping on Wednesday, while the U.S. stock market flipped between losses and small gains after the Federal Reserve opted not to raise interest rates.

The S&P 500 slipped 0.1% in late trading after briefly erasing all of an earlier drop off 1.2%. The Dow Jones Industrial Average was down 688 points, or 1.3%, with a little less than an hour remaining in trading, and the Nasdaq composite was 0.3% higher.

The action was stronger in the oil market, where the price of Brent crude leaped 7.3% to settle at $88.09 per barrel after fighting resumed in the war with Iran and raised worries about the global flow of oil. Iran launched a barrage of missiles at American forces in the Middle East, while the U.S. military partnered with Saudi Arabia to strike Tehran-backed militias in Iraq.

Brent oil’s price had swung as low as $72 early this month and as high as $102 last week on uncertainty about whether the United States and Iran could reach a deal to allow oil tankers to move freely again from the Middle East to customers worldwide.

The swings have raised worries that inflation will reaccelerate, just when it had begun to slow more than economists expected. That had traders coming into the day betting on a roughly 34% probability that the Fed would raise its main interest rate in the afternoon, according to data from CME Group.

Higher rates can keep a lid on inflation, but they can also slow the economy and undercut prices for stocks and other investments.

Fed officials instead voted to keep the federal funds rate steady, though three members of the policymaking committee did want to raise rates.

Fed Chair Kevin Warsh implied the bond market may already be doing some of the work to restrain inflation, pointing to how yields have climbed since the central bank's last meeting six weeks ago. He's been trying to give financial markets fewer clues about what the Fed may do with interest rates in the near future.

“Did the Fed take an explicit change in its policy rate today? No, but I think that’s the beginning of the story,” Warsh said.

Higher rates particularly hurt stocks seen as the most expensive, and scrutiny has already been rising on makers of computer chips and other winners of the frenzy around artificial-intelligence technology.

Unlike the dot-com bubble at the turn of the millennium, the recent surges for sellers of computer processors and memory are backed by real revenue and profits. But that exceptional growth won't be sustainable if AI does not produce as much profit and productivity as hoped.

The skepticism has hit South Korea’s stock market in particular because it’s dominated by two tech giants, Samsung Electronics and SK Hynix. Seoul’s Kospi index tumbled 6% Wednesday, a day after it plunged 10.8%, and trimmed its gain for the year so far to 34.4%.

SK Hynix’s stock in Seoul dropped 9.6%. It reported record amounts of revenue and profit for a quarter thanks to strong demand because of AI. But its 257% growth in revenue still wasn’t enough to meet analysts’ expectations.

On Wall Street, Nvidia was the heaviest weight on the S&P 500 after the chip company fell 1.2%.

KLA Corp., whose products and services help make semiconductors, fell 6.5% even though it reported stronger-than-forecast profit and revenue for the latest quarter. Expectations were high after its stock surged nearly 150% in this year's first six months.

Helping to limit the U.S. stock market's losses was Apple, which rose 0.6%. Analysts say it's almost become an “anti-AI” bet among Big Tech stocks because of its more limited spending on the technology versus rivals. Apple's total market value has topped $5 trillion after climbing 26% this year.

On Tuesday, gains for stocks outside of AI helped offset weakness for Micron and other tech companies. Analysts have been saying such a rotation in the market from AI to less-loved areas could be healthy, but the majority of U.S. stocks fell with tech on Wednesday.

Hims & Hers Health tumbled 11.4%, for example, after the Federal Trade Commission, Utah and California alleged it shared consumers’ sensitive health information about medical conditions with third-party advertising platforms despite claiming its services maintain consumers’ privacy. Hims & Hers said their lawsuit is contorting “the law to try to manufacture claims,” which it called baseless.

In stock markets elsewhere around the world, indexes were mixed. Hong Kong’s Hang Seng rose 2%, and Japan's Nikkei 225 fell 1.5% for two of the bigger moves.

In the bond market, Treasury yields swiveled up and down following the Fed's decision and Warsh's insistence on not guiding the market.

The yield on the 10-year Treasury rose to 4.64% from 4.61% late Tuesday. High yields have already sent long-term U.S. mortgage rates to their highest level in nearly a year.

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AP Business Writers Yuri Kageyama and Matt Ott contributed to this report.