U.S. stock markets closed lower on Wednesday following the Federal Reserve’s decision to keep rates unchanged and Fed Chair Jerome Powell’s indication that a rate cut was unlikely at the next meeting in March.
The Dow Jones Industrial Average dropped 317.01 points, or 0.82 percent, to 38,150.3. The S&P 500 fell 79.32 points, or 1.61 percent, to 4,845.65. The Nasdaq Composite Index also declined by 345.89 points, or 2.23 percent, to 15,164.01. This drop was influenced by disappointing earnings reports from Alphabet, Microsoft, and AMD, as well as Tesla’s legal challenges related to Elon Musk’s pay package.
Every primary S&P 500 sector ended in the red, with communication services and technology leading the losses by dropping 3.93 percent and 2.11 percent, respectively. Health was the sector with the smallest decline, down 0.11 percent.
While the Fed did keep its benchmark interest rate within the expected range of 5.25 percent to 5.5 percent, it removed previous hints of future rate increases, signaling a potential shift in its approach. Instead, it emphasized the importance of stability in inflation and employment, suggesting that future policy decisions would be cautious and data-driven.
The policy statement also noted that “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 2 percent.”
Powell’s comments also suggested that a rate cut in March was unlikely. After his speech, the probability of a rate cut in March, as indicated by market pricing, dropped from 56 percent to around 36 percent. There will be only one more reading of personal consumption expenditure (PCE) data before the Fed’s March meeting.
