Technology Stocks Drive Market Downward Ahead of Fed Rate Decision
Wednesday's trading session witnessed a decline in technology stocks, as markets remained cautious ahead of the Federal Reserve's latest interest rate announcement. The Nasdaq Composite (^IXIC), heavily weighted towards tech companies, dropped approximately 0.5%, retracing a portion of Tuesday's rebound rally. The S&P 500 (^GSPC) also fell by nearly 0.5%, while the Dow Jones Industrial Average (^DJI) dipped 0.3%.
The Federal Reserve's announcement, which left interest rates unchanged at 4.25%-4.5%, was met with mixed reactions. Notably, the central bank removed language from its December statement indicating progress towards its inflation target of 2%, stating simply that "Inflation remains somewhat elevated." The removal of this language initially spooked markets, with stocks briefly moving to session lows. However, Fed Chair Jerome Powell later downplayed the change, referring to it as "language cleanup" rather than a signal of concern about inflation.
Aside from the Fed's policy stance, Nvidia (NVDA) continued to pressure the tech sector on Wednesday. The stock tumbled more than 6% following a Bloomberg report that the Trump administration was considering additional curbs on its chip exports.
In the aftermath of Wednesday's closing bell, investors turned their attention to Meta (META) and Microsoft's quarterly results, hoping for reassurance that the substantial AI investments made by Big Tech would pay off in growth. Tesla (TSLA) also announced its megacap earnings for Wednesday, with analysts keen to identify a new catalyst to reignite its stock price.
Powell's comments on cryptocurrencies during the press conference were also noteworthy. He emphasized the Fed's role in monitoring banks' involvement with crypto and cryptocurrency tokens, but stressed that the central bank was not opposed to innovation in this sector.
Regarding the broader economic landscape, Powell acknowledged some uncertainty due to shifting political policies. However, he expressed confidence that the Federal Reserve would navigate these uncertainties and continue to fulfill its duties.
Despite the overall bearish sentiment, some companies reported positive news. Starbucks (SBUX) shares surged over 5% after reporting improved sequential sales trends in the US. ASML (ASML), a Dutch semiconductor equipment manufacturer, rose 6% after posting better-than-expected fourth quarter earnings.