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  • Writer's pictureThe San Juan Daily Star

Wall St gyrates after Fed holds US rates steady, says no cuts imminent

U.S. stocks veered after the Federal Reserve held interest rates steady while hinting that no rate cuts were imminent.

The three major U.S. stock indexes were already weighed down by weakness in tech and tech-adjacent megacap stocks the day after disappointing Alphabet results. All three turned lower ahead of Fed Chair Jerome Powell’s Q&A session, expected to begin shortly.

As expected, the Federal Open Markets Committee (FOMC) left its key policy rate unchanged at 5.25%-5.50% against a backdrop of gradually cooling inflation and a resilient economy.

In its accompanying statement, the FOMC said it “does not expect it will be appropriate to reduce the target range until it has gained greater confidence,” a blow to market participants who were hoping for a dovish pivot as early as March.

“There were no surprises in the Fed statement,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “It does appear that further rate hikes are off the table, which is a positive, but investors should continue to expect higher for longer as we’re still quite a ways away from the sort of economic data that would push the Fed to lower rates.”

At 02:10 p.m. the Dow Jones Industrial Average fell 61.72 points, or 0.16% , to 38,405.59, the S&P 500 lost 46.13 points, or 0.94%, to 4,878.84 and the Nasdaq Composite lost 222.88 points, or 1.44%, to 15,287.02.

European shares ended flat on Wednesday, as losses in technology stocks countered gains fostered by upbeat earnings, while a strong forecast by drugmaker Novo Nordisk helped Copenhagen shares scale record highs.

The pan-European STOXX 600 index held steady at 485.67 at close, logging a 1.4% rise in January, its third consecutive monthly gain.

Heavyweight healthcare stocks were in the spotlight, advancing 0.5% with Danish drugmaker Novo Nordisk adding 3.6% to notch an all-time high after Europe’s most valuable company forecast another year of double-digit growth.

The stock pushed Copenhagen’s OMX 20 to a fresh record high, closing 2.3% higher.

Also adding to the sector’s gains was GSK, which gained 2.0% after beating fourth quarter estimates.

Beijer Ref jumped 11.9% after the Swedish wholesaler of cooling technology reported quarterly sales above expectations and forecast continued growth in 2024, while Spanish lender Santander rose 2.1% after posting record-high profit for the last quarter of 2023, beating forecasts.

The European real estate index advanced 1.0%, lifted by a 6.3% rise in Germany’s TAG Immobilien after HSBC upgraded its rating to “buy”.

Swiss drugmaker Novartis fell 3.5% on missing estimates for fourth-quarter profit, while H&M slumped 12.4% to the bottom of the STOXX 600 after the Swedish fashion retailer revealed its sales for December and January fell by 4% compared with the previous year, while the company also announced a surprise CEO exit.

Technology, which houses most of Europe’s chipmakers, fell 0.6%, tracking losses in their U.S. counterparts. [.N]

On the data front, French consumer prices rose 3.4% year-on-year in January, a touch above expectations, but inflation slowed from the previous month, according to preliminary data. A separate reading showed German inflation eased slightly further than expected in January to 3.1%.

“The economy has been pretty weak for about a year and the data today confirms a further decline in inflation in Europe,” said Joost van Leenders, senior investment strategist at Van Lanschot Kempen.

Government bond yields across Europe dipped tracking a strong rally in U.S. Treasuries that pushed yields lower after U.S jobs data. [GVD/EUR]

Investor attention will now shift to the Federal Reserve’s interest rate verdict, due at 1900 GMT, for clues regarding the timing of interest rate cuts in the world’s largest economy.

“When you look at the comments of Fed policymakers over the past weeks, they’ve pushed back against very early rate cuts ... I don’t think that (Fed Chair) Powell will want to get those expectations for a March cut back into the market,” added Van Lanschot Kempen’s Leenders.

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