US stocks closed mixed on Wednesday following the Federal Reserve‘s decision to maintain its key interest rate unchanged, as anticipated. The central bank indicated that while a rate cut is likely to be its next move, sustained progress on inflation remains uncertain.
The Dow Jones Industrial Average managed to eke out a small gain, while the S&P 500 and the Nasdaq ended the session lower.The Federal Open Markets Committee concluded its two-day meeting with a unanimous decision to keep the Fed funds target rate at 5.25%-5.50%. The accompanying statement left the timing of any potential rate cut unclear, and Fed officials emphasized their ongoing concern that the initial months of 2024 have not significantly bolstered their confidence in declining inflation.
During the subsequent press conference, Fed Chair Jerome Powell acknowledged that while the central bank remains committed to bringing inflation back to its 2% target, he noted progress toward that goal and rejected the idea of an imminent rate hike.
“Powell didn’t rock the boat very much,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “He acknowledged that inflation is still a problem but remained optimistic that it will improve over the coming quarters.”
“What sparked today’s rally was when he said the next move will not be a hike,” Detrick added. “He pushed back against that, hard. … That allowed the bulls to take charge.” Powell also mentioned that the labor market was normalizing, citing data released on Wednesday that showed job openings falling to a three-year low.
As the first-quarter reporting season has surpassed the halfway point, 310 of the companies in the S&P 500 index have reported their earnings. According to LSEG, 77% of these companies have posted earnings that beat consensus estimates. Analysts now anticipate aggregate first-quarter S&P 500 earnings growth of 6.6% year-on-year, a notable improvement from the 5.1% estimate as of April 1, as per LSEG data.
Several individual companies experienced significant movements in their stock prices. Advanced Micro Devices fell 9.0% after providing a disappointing forecast for its artificial intelligence chip sales, while Super Micro Computer dropped 14.0% following its quarterly revenue miss. These weak results led to a 3.5% decline in the Philadelphia Semiconductor Index.
On the other hand, Amazon.com rose 2.2% on better-than-expected quarterly results, driven by increased interest in AI, which helped boost cloud-computing growth. Johnson & Johnson advanced 4.6% after announcing its intention to proceed with a proposed $6.48 billion lawsuit settlement over allegations that its baby powder and other talc products cause ovarian cancer.
Starbucks experienced a significant drop of 15.9% after the coffee chain reduced its sales forecast and reported the first decline in same-store sales in nearly three years. CVS Health also plunged 16.8% after its earnings fell short of consensus estimates, and the healthcare company slashed its annual profit forecast.
The Dow Jones Industrial Average rose 87.37 points, or 0.23%, to 37,903.29, while the S&P 500 lost 17.3 points, or 0.34%, to 5,018.39, and the Nasdaq Composite dropped 52.34 points, or 0.33%, to 15,605.48. Among the 11 major sectors in the S&P 500, energy shares recorded the largest percentage loss, while utilities led the gainers.
Advancing issues outnumbered decliners on the NYSE by a 1.38-to-1 ratio, and on the Nasdaq, a 1.50-to-1 ratio favored advancers. The S&P 500 posted 12 new 52-week highs and 10 new lows, while the Nasdaq Composite recorded 55 new highs and 105 new lows. The volume on US exchanges was 12.26 billion shares, compared with the 11.08 billion average for the full session over the last 20 trading days.
(With inputs from agencies)