©Reuters. Traders work at the New York Stock Exchange (NYSE) in New York City, U.S., January 29, 2024. REUTERS/Brendan McDermid
By Stephen Culp
NEW YORK (Reuters) – U.S. stocks closed sharply lower on the last trading day of January after the Federal Reserve kept interest rates stable, reiterating that, despite progress, inflation risks remain and has hopes of an interest rate cut as early as March were dashed.
The three major US stock indexes were already weighed down by weakness in tech stocks and adjacent megacaps the day after Alphabet’s (NASDAQ:) disappointing results. All three fell after the announcement and continued to fall during Fed Chair Jerome Powell’s press conference.
All three indexes posted gains for the month.
As expected, the Federal Open Markets Committee (FOMC) left the key rate unchanged at 5.25%-5.50% amid a gradual cooling of inflation and a resilient economy.
In its accompanying statement, the FOMC said it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” a blow to investors. market operators who were hoping for a quick accommodative move. pin.
“There were no surprises in the Fed statement,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “It appears that further rate hikes are off the table, which is good, but investors should continue to expect rate hikes for longer as we are still quite far from the kind of economic data that would push the Fed to lower rates.”
Indexes continued to fluctuate after Fed Chair Jerome Powell said the FOMC was confident it would be appropriate to cut rates once it confirmed inflation was under control, but effectively ruled out a rate cut. rates in March.
“The good news is we can forget about any further restrictions,” said Art Hogan, chief market strategist at B. Riley Wealth in New York. “The bad news is ‘when,’ not ‘if,’ they will cut rates, and that ‘when’ has been pushed to the fringes of consensus.”
According to preliminary data, the S&P 500 index lost 79.82 points, or 1.62%, closing at 4,845.15 points, while the Nasdaq Composite lost 348.96 points, or 2.25%, at 15,160.94. The Dow Jones Industrial Average fell 319.91 points, or 0.83%, to 38,149.90.
The fourth-quarter earnings season has entered a frenetic phase, with nearly one in five companies scheduled to report their earnings this week.
So far, 176 have published results. Of these, 80% exceeded expectations, according to LSEG.
Analysts now see aggregate fourth-quarter S&P 500 earnings growth of 6.1% year over year, an improvement from the 4.7% expected at the end of the quarter, according to LSEG.
Alphabet Inc shares slipped a day after it reported disappointing ad sales and expected increased capital spending to boost its artificial intelligence capabilities.
Microsoft Corp (NASDAQ:) also expects increased costs to develop new AI capabilities, but its quarterly results beat analysts’ expectations. Its shares also closed the session lower.
Shares of Community Bancorp of New York (NYSE:) sank to its lowest level in two decades after posting a surprise loss and slashing its dividend.
A set of economic indicators released Wednesday, including fourth-quarter job costs and the ADP jobs index, suggest some easing in the labor market, seen by the Fed as a necessary precondition for returning inflation to its annual target by 2%.