new york: U.S. stocks fell on the last trading day of January following the Federal Reserve’s decision
(The Fed) left interest rates unchanged, dashing expectations that it would cut rates as early as March.
The three major U.S. stock indexes were already weighed down by weakness in tech stocks and tech mega-cap stocks following Alphabet’s disappointing results.
Losses widened in all three after the Fed’s announcement and Chairman Jerome Powell’s subsequent press conference.
The Dow Jones Industrial Average fell 317.01 points, or 0.82%, to 38,150.30, the S&P 500 fell 79.32 points, or 1.61%, to 4,845.65, and the Nasdaq Composite Index fell 345.88 points, or 2.23%, to 15,164.01.
The S&P 500 closed with its steepest daily percentage decline since September 21st. However, all three indexes still posted monthly gains.
All 11 major U.S. stock indexes ended in the red, with communications services and tech stocks suffering the biggest losses.
As expected, the Federal Open Market Committee (FOMC) kept its key policy interest rate unchanged at 5.25% to 5.50% on the back of gradual cooling in inflation and economic resilience.
“We do not believe it is appropriate to lower the target range until we have greater confidence that inflation is on a sustained path toward 2%,” the FOMC said in a statement, adding that it does not believe it is appropriate to lower the target range quickly. Investors who had high expectations were disappointed.
“I was not surprised by the Fed’s statement,” Oliver Paasche, senior vice president at Wealthspire Advisors, said in New York. “Further rate hikes do not seem likely, which is positive, but there is still a long way to go before we see any economic data that would prompt the Fed to cut rates, so investors expect rate hikes for a long time. We need to keep doing it.”
The index soared after Fed Chairman Jerome Powell said the FOMC was confident that a rate cut would be appropriate if inflation was subdued, effectively eliminating the possibility of a March rate cut.
“Fortunately, we can forget about any further tightening,” said Art Hogan, chief market strategist at B. Riley Wealth. “The bad news is that it’s not ‘if’ but ‘when’ to cut rates, and that ‘when’ has been relegated to the fringes of consensus.”
The fourth quarter earnings season is in full swing, with nearly one in five S&P 500 companies scheduled to report results this week.
176 results have been posted so far. According to LSEG, 80% of them exceeded expectations.
Analysts now expect earnings growth across the S&P 500 index to be 6.1% year-over-year in the fourth quarter, higher than the 4.7% expected at the end of the quarter, according to LSEG.
Alphabet shares fell 7.5% a day after Google’s parent company reported disappointing ad sales and expected increased capital spending to beef up its artificial intelligence capabilities.
Microsoft also expects the cost of developing AI capabilities to rise, but its quarterly results beat analysts’ expectations. The company’s stock price was recently down 2.7%.
New York Community Bancorp’s stock price fell 37.7% to its lowest level in more than 20 years after the company reported an unexpected loss and cut its dividend. The KBW Regional Bank Index fell 6.0%.
A series of economic indicators released Wednesday, including fourth-quarter employment costs and the ADP employment index, suggested some easing in the labor market, and the Fed said it needed to bring inflation down to its 2% annual target. I see it as a prerequisite. – Reuters
