Stock Market Today: Stocks Slump After Alphabet Earnings, Fed Meeting
The main indexes closed lower Wednesday after Alphabet's earnings-related selloff and the Fed's hawkish outlook toward rate cuts.
Stocks were mixed in the lead up to this afternoon's policy announcement from the Federal Reserve, with the tech and communication services sectors woefully underperforming following a batch of poorly received earnings updates. However, selling ramped up across all three main indexes after the Fed indicated it is in no hurry to cut interest rates.
Around midday, the Dow Jones Industrial Average was up marginally, while the S&P 500 and the Nasdaq Composite were down around 1% apiece.
Alphabet (GOOGL) was the biggest drag on the S&P 500 and Nasdaq today. Shares of the Magnificent 7 stock plunged 7.5% – shedding $142 billion in market value along the way – as Wall Street weighed disappointing ad revenue over the Google parent's Q4 top- and bottom-line beats. The company also said capital expenditures "will be notably larger" in 2024 vs 2023.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Fellow mega-cap stock Microsoft (MSFT) created its own headwinds for the indexes, shedding 2.7% despite its fiscal second-quarter results coming in above estimates. Additionally, the company forecast fiscal Q3 revenue to arrive between $60 billion and $61 billion, inline with analysts' estimate for $60.9 billion in sales.
"There was no real weakness in the numbers or guidance," says Louis Navellier, chairman and founder of Navellier & Associates. "It just wasn't perfect."
Fed gives cautious rate-cut outlook
But today's main event was the conclusion of the January Fed meeting. As was widely expected, the central bank left the federal funds rate at a range of 5.25% to 5.5%. The real anticipation was around the Fed's outlook for potential rate cuts, and disappointment around this is what sparked widespread selling across Wall Street this afternoon.
Specifically, the Federal Reserve statement indicated the committee "does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably" toward the central bank's 2% target.
Fed Chair Jerome Powell reiterated this in his subsequent press conference, saying the central bank "needs confirmation" before it can be confident that inflation is coming down to its target before it reduces rates. Powell added that while it's encouraging how much inflation has declined, there's still "a ways to go."
"Although the Fed softened some of its hawkish language, they also suggested it wasn't yet clear that inflation was entirely under control," says Chris Larkin, managing director of trading and investing at E*TRADE from Morgan Stanley.
In addition to the sticky inflation numbers we've seen lately, the labor market has remained resilient, Larkin adds. "Friday's jobs data may help clarify the picture in the near term, although even very soft numbers may not be enough to get the Fed to speed up its timeline."
Anthony Denier, CEO of Webull, agrees that "investors need to pay attention to the economic reports, especially those related to inflation and the labor market. The Fed doesn’t want to cut too soon and risk a resurgence of inflation." Denier is expecting the central bank to cut rates three times this year, "probably in June, September and December."
Market still sees a March rate cut
In December 2023, the Fed's dot plot projected three quarter-point rate cuts this year. However, according to CME Group's FedWatch tool, futures traders are pricing in up to six 0.25% rate cuts this year – including a 36% chance of one occurring at the next Fed meeting in March.
At the close, the Dow was down 0.8% at 38,150, the S&P 500 was off 1.6% at 4,845, and the Nasdaq had shed 2.2% to 15,164.
Related content
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.
-
Earn Delta SkyMiles Worth Up to $1,800 with an AMEX Business Card
Delta SkyMiles and American Express offer 150,000 on business credit card for new cardholders.
By Ellen Kennedy Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Soar Amid Strong Earnings for Big Tech
Equities ended the week on an up note thanks to some of the market's biggest names.
By Dan Burrows Published
-
Stock Market Today: Markets Tumble Amid Slower Economic Growth and Rising Prices
Disappointing readings on GDP and inflation helped tank equities.
By Dan Burrows Published
-
Stock Market Today: Stocks Run Out of Steam Ahead of Meta Earnings
The Dow Jones Industrial Average snapped a four-day winning streak after Boeing's first-quarter results.
By Karee Venema Published
-
Stock Market Today: Nasdaq Soars Ahead of Tesla Earnings
The EV stock rose nearly 2% ahead of its highly anticipated Q1 earnings report, due after tonight's close.
By Karee Venema Published
-
Stock Market Today: Markets Rebound Ahead of Big Week for Earnings
Equities rallied on easing geopolitical tensions, upcoming quarterly results.
By Dan Burrows Published
-
Stock Market Today: Nasdaq Spirals as Netflix Nosedives
A big earnings boom for credit card giant American Express helped the Dow notch another win.
By Karee Venema Published
-
Stock Market Today: S&P 500, Nasdaq Extend Losing Streaks
The two indexes have closed lower for five straight sessions.
By Karee Venema Published
-
Stock Market Today: Dow Slips After Travelers' Earnings Miss
The property and casualty insurer posted a bottom-line miss as catastrophe losses spiked.
By Karee Venema Published