Stephen Culp
NEW YORK (Reuters) – U.S. stocks closed mixed on Wednesday after the Federal Reserve left its key interest rate unchanged as expected and indicated that while its next move would likely be a rate cut, further progress would be made inflation is not guaranteed.
The S&P 500 and Nasdaq indices ended trading lower, although they showed modest growth.
The Federal Open Market Committee ended its two-day monetary policy meeting with a unanimous decision to leave the Fed’s target rate at 5.25%-5.50%.
An accompanying statement cast doubt on the timing of any rate cuts, with Fed officials emphasizing their concerns that the first months of 2024 have done little to build the confidence they seek in lower inflation.
At a subsequent press conference, Fed Chairman Jerome Powell suggested that while the central bank remained focused on returning inflation to its 2% target, it noted progress toward that goal and rejected the idea of imminent rate hikes.
“Powell didn’t rock the boat much,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “He acknowledged that inflation remains a problem, but remained optimistic that it will improve in the coming quarters.”
“What sparked today’s rally was him saying the next step would not be a rate hike,” Detrick added. “He resisted it a lot… It allowed the bulls to take charge.”
Powell said the labor market was normalizing, citing data released Wednesday showing job openings had fallen to a three-year low.
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The reporting season for the first quarter is already halfway over: 310 companies have submitted reports. Of these, 77% reported earnings that beat consensus, according to LSEG.
Analysts now expect aggregate first-quarter earnings growth for the S&P 500 to be 6.6% year over year, a significant improvement from the 5.1% estimate on April 1, LSEG data showed.
Among individual companies, Advanced Micro Devices (NASDAQ:) fell 9.0% after disappointing sales forecast for artificial intelligence chips, while Super Micro Computer (NASDAQ:) fell 14.0% as the company’s quarterly revenue fell.
The weak results sent the Philadelphia Semiconductor Index down 3.5%.
Amazon.com (NASDAQ:) shares rose 2.2% on better-than-expected quarterly results as interest in artificial intelligence fueled growth in cloud computing.
Johnson & Johnson (NYSE:) shares rose 4.6% after the company said it would pursue a proposed $6.48 billion lawsuit over allegations that its baby powder and other talc products cause ovarian cancer.
Starbucks (NASDAQ:) shares fell 15.9% after the coffee chain cut its sales forecast as it reported its first same-store sales decline in nearly three years.
CVS Health (NYSE:) shares fell 16.8% after the health care company’s earnings missed consensus estimates and it cut its full-year profit forecast.
The Dow Jones Industrial Average rose 87.37 points, or 0.23%, to 37,903.29, the S&P 500 lost 17.3 points, or 0.34%, to 5,018.39 and fell 52. 34 points, or 0.33%, to 15,605.48.
Of the 11 major sectors in the S&P 500 index, energy stocks posted the largest percentage loss, while utilities led the gainers.
Advancing issues outnumbered declining ones on the New York Stock Exchange by a 1.38-to-1 ratio; On the Nasdaq, the ratio was 1.50 to 1 in favor of growth companies.
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The S&P 500 hit 12 new 52-week highs and 10 new lows; The Nasdaq Composite Index recorded 55 new highs and 105 new lows.
Volume on U.S. exchanges was 12.26 billion shares, compared with the full-session average of 11.08 billion over the past 20 trading days.