Wall Street drops after Fed meeting

by Jonathan Adams
Wall Street

Fed Chairman Jerome Powell said the central bank was unlikely to lower interest rates in March

Wall Street stocks slid Wednesday following earnings from tech giants that failed to assure investors as the Fed signalled that more time was needed to cut interest rates.

Federal Reserve Chairman Jerome Powell said the central bank was unlikely to lower interest rates in March. He pointed to progress in the battle to cool inflation to its 2% target, while saying more improvement was needed.

We believe that our policy rate is likely at its peak for this tightening cycle, Powell told reporters after the rate decision.

He further said that “almost everyone” on the Fed’s rate-setting committee was in favour of a reduction in 2024, but that a move as soon as the next meeting in March was not likely.

All three major indices pulled back with the broad-based S&P 500 shedding 1.6%.

The Fed’s communication was less dovish than anticipated, indicating that the interest rate cutting cycle may start later than many traders were anticipating, said a note from Matt Weller of Forex.com.

The Fed announcement came ahead of Friday’s closely watched government jobs report.

Payroll firm ADP estimated the US private sector added 107,000 jobs in January, fewer than expected.

While all 11 sectors of the S&P 500 closed in the red, tech shares were especially weak in spite of solid earnings from Microsoft and Google parent Alphabet. The results were not strong enough to extend a months-long sector rally over AI.

Alphabet shares ended 7.4% lower while Microsoft shed 2.7%.

There is a sense in the market that the Microsoft and Google earnings failed to live up to the high expectations around artificial intelligence, said Kathleen Brooks, research director at XTB.

Although Microsoft saw earnings and profits increase, its forward guidance was not particularly well received, she added.

Apple, Amazon and Facebook owner Meta, are due to report later this week.

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