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Concerns about Middle East persist

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Iran leader rejects Trump's demand for surrender

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Indexes up: Dow 0.3%, S&P 500 0.3%, Nasdaq 0.4%

(Updates to after Fed statement)

By Caroline Valetkevitch

NEW YORK, June 18 (Reuters) -

The three major U.S. stock indexes briefly added to gains in

volatile trade on Wednesday after the Federal Reserve left

interest rates unchanged and signaled borrowing costs were still

likely to fall this year, but slowed the overall pace of

expected future rate cuts.

While policymakers

still anticipate

cutting rates by half a percentage point this year, they

slightly slowed the pace from there to a single

quarter-percentage-point cut in each of 2026 and 2027, based on

the Fed's statement. Policymakers estimated that President

Donald Trump's tariffs would stoke inflation.

"The Fed is looking at slower economic growth and the

vote was unanimous and the fact that rates remain unchanged is

no surprise," said Peter Cardillo, chief market economist at

Spartan Capital Securities.

Investors also have been closely watching developments in

the Middle East, with some concerned about the possibility of a

more direct U.S. military involvement in the Israel-Iran aerial

war.

Iranian Supreme Leader Ayatollah Ali Khamenei

rejected

Trump's demand for unconditional surrender. Trump said his

patience had run out, though he gave no clue about what his next

step would be.

Immediately after the Fed's statement, the indexes added

to gains but then returned to levels seen just before the news.

At 2:14 p.m. the Dow Jones Industrial Average rose 124.01

points, or 0.29%, to 42,339.81, the S&P 500 gained 17.02

points, or 0.28%, to 5,999.74 and the Nasdaq Composite

gained 71.45 points, or 0.37%, to 19,592.54.

Earlier in the day, initial jobless claims data on Wednesday

showed the number of Americans filing new applications for

unemployment benefits fell last week, but stayed at levels

consistent with a further loss of labor market momentum in June.

Advancing issues outnumbered decliners by a 2.27-to-1 ratio

on the NYSE. There were 85 new highs and 45 new lows on the

NYSE.

On the Nasdaq, 2,803 stocks rose and 1,561 fell as

advancing issues outnumbered decliners by a 1.8-to-1 ratio.

(Additional reporting by Kanchana Chakravarty and Sukriti Gupta

in Bengaluru; Editing by Shinjini Ganguli and David Gregorio)