Wall Street’s main indexes opened lower on Tuesday after stronger-than-expected labor costs signaled persistent inflationary pressures, while caution prevailed ahead of the Federal Reserve’s interest rate decision.
U.S. stocks closed mixed on Wednesday after the Federal Reserve left its key interest rate unchanged, as expected, but indicated that its next move will probably be to cut rates.
The S&P 500 and the Nasdaq ended lower while the Dow Jones Industrial Average notched a modest gain.
The Federal Open Markets Committee (FOMC) concluded its two-day monetary policy meeting with a unanimous decision to let the Fed funds target rate stand at 5.25%-5.50%.
The accompanying statement left the timing of any rate cut in doubt, and Fed officials underscored their concern that the first months of 2024 have done little to build the confidence they seek in falling inflation.
At the subsequent press conference, Fed Chair Jerome Powell suggested that while the central bank remains focused on bringing inflation back to its 2% target, he noted progress toward that goal and dismissed the notion of an imminent rate hike.
“Powell didn’t rock the boat very much,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “He acknowledged that inflation is still a problem but remained optimistic that it will improve over the coming quarters.”
“What sparked today’s rally was when he said the next move will not be a hike,” Detrick added. “He pushed back against that, hard. ... That allowed the bulls to take charge.”
Powell said the labor market was normalizing, citing data released on Wednesday showing job openings dropping to a three-year low.
First-quarter reporting season has breezed passed the halfway point, with 310 of the companies in the S&P 500 index having reported. Of those, 77% posted consensus-beating earnings, according to LSEG.
Analysts now expect aggregate first-quarter S&P 500 earnings growth of 6.6% year-on-year, a significant improvement over the 5.1% estimate as of April 1, LSEG data showed.
The Dow Jones Industrial Average fell 48.7 points, or 0.13%, at the open to 38,337.4. The S&P 500 fell 12.4 points, or 0.24%, at the open to 5,103.78, while the Nasdaq Composite dropped 62.2 points, or 0.39%, to 15,920.886 at the opening bell.t gained 2.5%.
MSCI’s gauge of stocks across the globe rose 0.25 points, or 0.03%, to 758.40.
On Wall Street, the Dow Jones Industrial Average fell 76.51 points, or 0.20%, to 38,427.18. The S&P 500 lost 9.58 points, or 0.19%, at 5,060.97 and the Nasdaq Composite lost 26.80 pointsSeptember and ending the year with 42 basis points of cuts, down from previous bets for 150 bps.
“One thing is fore sure: the Fed is not raising rates. I believe they want to tighten financial conditions by communicating a further distance is required for cuts, but they can do those cuts at whatever speed is necessary,” said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia.
The drastic shift in rate expectations has elevated Treasury yields and lifted the dollar in the past few weeks, with pressure felt particularly in Asia.