US Stocks Fall for Third Day as Fed Hikes Rates by 25 Basis Points, Dow Drops Over 600 Points; Chip Stocks Buck Trend, SpaceX Rises 5%

TradingKey - The Fed announced a 25-basis-point rate hike, with Warsh pointing out that inflation is too high and has persisted for too long, sending US stocks lower. Bank stocks led the decline, while some chip stocks bucked the trend to advance, and optical communications stocks led the gains.

At the close, the Dow Jones Industrial Average fell 1.21% to 51,461.90 points; the Nasdaq Composite Index slipped 0.01% to 25,978.42 points; and the S&P 500 Index dropped 0.45% to 7,551.81 points.

Tech Stock Performance

SpaceX (SPCX) rose 5.15% to $150.88.

SpaceX announced that Starship's 14th flight mission is scheduled for launch on September 22, attempting its first Earth-orbital flight and deploying 26 Starlink V3 satellites, marking the Starship program's first commercial revenue-generating mission. Meanwhile, the US confirmed for the first time that it possesses in-orbit space weapons, and the accelerated progress of the "Golden Dome" project provided an additional catalyst for space stocks. Morgan Stanley published a research report noting that amid volatility in AI trades, SpaceX may be relatively defensive among its peers, reiterating an "Overweight" rating and a $300 target price.

Among mega-cap tech stocks, SpaceX (SPCX) rose 5.15%, TSMC (TSM) gained 1.23%, Nvidia (NVDA) rose 0.82%, Meta Platforms (META) gained 0.46%, Tesla (TSLA) rose 0.42%, Apple (AAPL) gained 0.32%, and Broadcom (AVGO) rose 0.07%; on the downside, Microsoft (MSFT) fell 1.37%, Amazon (AMZN) dropped 0.99%, and Google (GOOGL) declined 0.61%.

[Source: FutuBull]

The Philadelphia Semiconductor Index rose 0.63% to 11,246.11 points. Among its 30 constituents, 18 advanced and 12 declined.

Among optical communications stocks, Lumentum (LITE) rose 9.59%, Credo Technology (CRDO) gained 7.38%, Coherent (COHR) rose 6.81%, Astera Labs (ALAB) gained 6.59%, and Marvell Technology (MRVL) rose 3.61%.

Company News

Apple Developing Custom-Chip Enterprise Server, Plans to Adopt Nvidia High-Speed Interconnect Technology

Apple is developing an enterprise server for AI applications that is planned to feature its custom M8 Ultra chip, according to a report by The Information. Apple has also held talks with Nvidia to adopt its NVLink Fusion interconnect technology. The product is currently expected to launch as early as 2029, targeting the AI inference market. This marks Apple's first serious evaluation of re-entering the enterprise server market since it discontinued Xserve servers in 2011.

Nvidia and Google Form AI Energy Alliance

Nvidia, Google, and Emerald AI announced on September 16 the formation of the AI Energy Management Alliance (AEMA), with the core objective of driving data centers to dynamically adjust power consumption based on real-time grid conditions. Nvidia and Emerald AI are working with energy and infrastructure partners to develop AI factories capable of responding to grid conditions in real time, while AEMA is also committed to establishing faster, risk-adjusted grid interconnection pathways for facilities that make verifiable flexibility commitments. The alliance directly addresses a central bottleneck in AI infrastructure expansion: power grid access. In key U.S. markets, connecting new AI data centers to the grid often takes five to seven years or even longer. AEMA believes that enhancing data center power flexibility could unlock up to 100 gigawatts of capacity from existing power systems while saving approximately $733 million in power system costs per gigawatt of new AI data center capacity.

Industry & Macro News

Fed Announces 25-Basis-Point Rate Hike, Median Forecast Shows One More Hike in 2026

On the 17th, the Federal Reserve implemented its first rate hike in three years. Its median dot plot projection showed one rate hike this year and rates remaining unchanged in 2027. The new projections show that interest rates will decrease in 2028 and remain between 3.5% and 3.75% in 2029. Previously, in its June forecast, the Fed expected a 25-basis-point rate hike this year and one rate cut in 2027. The Fed also raised its long-term projected federal funds rate to 3.2%, up from 3.1% in June. Among the 19 policymakers, 18 submitted rate outlook projections, strongly suggesting that Fed Chair Warsh, as in June this year, did not provide a specific forecast. The Fed's projections also showed that policymakers now expect inflation to be generally higher this year and in the coming years.

Warsh: Inflation Is Too High and Has Persisted Too Long; Summer Data Shows No Meaningful Improvement

In his opening remarks at the press conference, Fed Chair Warsh emphasized that neither he nor other policymakers are satisfied with the current pace of inflation. He stated: "Our main focus at present is on the price stability aspect of our monetary policy mandate. The fact is simple: inflation is too high, and it has lasted for too long. The inflation data this summer did not show me a meaningful improvement in the underlying trend." He pointed out that in recent CPI and PPI data, too many categories still saw increases exceeding 3% over the past 6 and 12 months. The Fed Chair stressed that the FOMC's goals are clear and vital: to achieve maximum employment and price stability, and to foster a thriving U.S. economy that serves as a global benchmark.