Headline: Tech Stocks Lead Markets Lower Amidst Fed Policy
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Technology stocks saw a decline on Wednesday, driven by a cautious sentiment following the Federal Reserve's latest decision. The central bank maintained interest rates within a range of 4.25%-4.5%, but removed language indicating progress towards its 2% inflation target.
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The Nasdaq Composite (^IXIC) dropped approximately 0.5%, retracing a rally seen on Tuesday. The broader S&P 500 (^GSPC) also declined slightly by 0.5%, while the Dow Jones Industrial Average (^DJI) lost 0.3%. Nvidia (NVDA) shares continued to put pressure on the tech sector, falling over 4% after reports emerged that the Trump administration was considering additional restrictions on the company's chip exports.
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After the markets closed, earnings season for Big Tech commenced. Tesla (TSLA) reported underwhelming results, with quarterly revenue below Wall Street expectations. Although after-hours trading initially saw a decline, Tesla shares later reversed course and gained approximately 3%. Meta (META) and Microsoft (MSFT) both saw their stocks decline after announcing their financial results. Meta's revenue guidance for the first quarter fell short of expectations, while Microsoft's cloud revenue missed estimates.
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The Federal Reserve's statement notably removed language previously included in December's report, which indicated progress towards a 2% inflation target. Fed Chair Jerome Powell downplayed this change, referring to it as mere "language cleanup" rather than a signal of concern. Powell also discussed the recent sell-off in tech stocks following the emergence of Chinese startup DeepSeek and its potential impact on artificial intelligence spending.
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The central bank's economic forecasts were said to face elevated uncertainty due to policy shifts under President Trump, particularly in areas such as tariffs, immigration, fiscal policy, and regulation. Powell emphasized that the labor market appeared to be reaching a "sustainable level" based on stable unemployment rates. Despite moderating shelter inflation, further progress is still needed to meet the Fed's goal.
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Powell mentioned that he had not received any contact from President Trump regarding interest rate demands. The Federal Reserve's decision to remove the term "progress" from its statement regarding inflation led to a shift in market sentiment, with traders now expecting a higher likelihood of interest rates remaining unchanged through May. Nvidia's stock extended its losses following reports of potential additional curbs on chip sales to China.
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A potential wildcard question in the upcoming Fed presser was raised regarding the situation with Nvidia and the broader impact of chip exports on AI investments and national security. The tech sector's performance remains closely tied to the earnings reports released by Nvidia's major customers, Tesla, Meta, and Microsoft, after the market closes.