US STOCKS-Wall St dips after Fed holds rates steady, hints at 'higher for longer'

A spate of economic indicators released on Wednesday, including fourth quarter employment costs and ADP's employment index, suggested some easing in the labor market, viewed by the Fed as a necessary precondition for bringing inflation down to its 2% annual target. Declining issues outnumbered advancers by a 1.4-to-1 ratio on the NYSE.

U.S. stocks veered lower after the Federal Reserve

held interest rates steady while reiterating that despite progress, inflation risks remain and 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 after the announcement but remained on track to notch monthly gains. The indexes later pared losses after Fed Chair Jerome Powell said the FOMC was confident it will be appropriate to reduce rates once it has confirmation inflation is coming down sustainably.

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 that inflation is moving sustainably toward 2%," 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." As Powell began his press conference, stocks continued to see-saw as investors parsed his statements about easing inflation with his assertion that the Fed is prepared to maintain the current rate for longer if needed.

At 02:39 p.m. the Dow Jones Industrial Average rose 26.59 points, or 0.06% , to 38,492.27, the S&P 500 lost 31.38 points, or 0.64%, to 4,893.59 and the Nasdaq Composite lost 167.75 points, or 1.10%, to 15,342.15. Fourth quarter earnings season has shifted into overdrive, with nearly one in five companies in the S&P 500 slated to report this week.

Thus far, 176 have posted results. Of those, 80% have beaten expectations, according to LSEG. Analysts now see aggregate fourth quarter S&P 500 earnings growth of 6.1% year-on-year, an improvement over the 4.7% forecast at the end of the quarter, per LSEG.

Alphabet Inc shares slid 6.4% the day after it reported disappointing ad sales and projected an increase in capital spending to boost its artificial intelligence capabilities. Microsoft Corp also forecast rising costs to develop new AI features, but its quarterly results beat analyst expectations. Its shares were last off 1.5%.

Shares of New York Community Bancorp tumbled 37.9%, touching their lowest level in over two decades after posting a surprise loss and slashing its dividend. The KBW Regional Bank index slid 3.7%. A spate of economic indicators released on Wednesday, including fourth quarter employment costs and ADP's employment index, suggested some easing in the labor market, viewed by the Fed as a necessary precondition for bringing inflation down to its 2% annual target.

Declining issues outnumbered advancers by a 1.4-to-1 ratio on the NYSE. There were 284 new highs and 46 new lows on the NYSE. On the Nasdaq 1,831 stocks rose and 2,339 fell as declining issues outnumbered advancers by about a 1.3-to-1 ratio.

The S&P 500 posted 59 new 52-week highs and 2 new lows while the Nasdaq recorded 119 new highs and 105 new lows.