Tech Stocks Lead Market Decline as Fed Holds Interest Rates Unchanged

Technology stocks weighed down markets on Wednesday, extending the subdued sentiment following the Federal Reserve's latest interest rate announcement, which left rates unchanged in a range of 4.25%-4.5%. The technology-heavy Nasdaq Composite (IXIC) shed approximately 0.5%, retracing part of a rally from Tuesday. The S&P 500 (GSPC) also declined by about 0.5%, while the Dow Jones Industrial Average (DJI) fell 0.3%.

In its statement, the Federal Reserve removed language from its December statement that indicated progress toward its 2% inflation target. Instead, it simply stated that "inflation remains somewhat elevated." Fed Chair Jerome Powell downplayed this change, describing it as "language cleanup" rather than a signal of concern. Markets rebounded somewhat following Powell's comments.

Outside of Fed policy, shares of Nvidia (NVDA) further pressured the tech sector on Wednesday, falling more than 4% after Bloomberg reported that the Trump administration was considering additional curbs on the company's chip exports.

After market close, earnings from several Big Tech companies were released. Tesla (TSLA) reported quarterly results that fell short of Wall Street expectations, but shares gained by about 3% after hours. Meta (META) and Microsoft (MSFT) both saw their stock prices decline after reporting weaker-than-expected guidance and results.

Meta's Sales Forecast Disappoints

Meta (META) shares dropped about 5% in after-hours trading after its first-quarter sales forecast came in below expectations. The company also announced plans to increase capital expenditures in 2025.

IBM's Revenue Forecast Beats Estimates, AI Bookings Rise

Shares of IBM (IBM) surged more than 11% in after-hours trading after its full-year revenue forecast exceeded estimates amid a rise in AI bookings. The company projected a 5% increase in constant currency revenue, exceeding estimates of 4.81% growth. IBM also reported that its generative AI book business now stands at over $5 billion.

Tesla's Stock Seesaws After Earnings Miss

Tesla (TSLA) shares initially fell as much as 6% before reversing course and rising 3% in after-hours trading. The company missed Wall Street's estimates for fourth-quarter earnings per share and other key metrics. Tesla's gross margins also disappointed, coming in below analysts' expectations.

Microsoft's Cloud Business Misses Revenue Expectations

Microsoft (MSFT) reported second-quarter earnings that beat expectations on both the top and bottom lines. However, revenue for its intelligent cloud business, which includes its popular Azure platform, fell short of estimates, sending the stock down as much as 5.5% in after-hours trading.

Powell Addresses Crypto and Market Sell-Off

Powell said the Fed's role regarding crypto is to monitor banks that serve crypto customers and ensure they manage risks appropriately. He added that the Fed is not opposed to innovation and would not take actions that could jeopardize legal crypto activities.

Powell also dismissed Monday's massive tech sell-off, attributing it to idiosyncratic factors rather than macroeconomic concerns.