US STOCKS-Nasdaq, S&P 500 fall as investors take cover before Fed decision

The tech-heavy Nasdaq and the benchmark S&P 500 slipped on Wednesday as chip stocks led losses on downbeat results and markets weighed fresh economic data ahead of the Federal Reserve's interest rate decision. The ADP National Employment report showed U.S. private payrolls increased more than expected in April, while a separate reading showed U.S. manufacturing contracted.

The tech-heavy Nasdaq and the benchmark S&P 500 slipped on Wednesday as chip stocks led losses on downbeat results and markets weighed fresh economic data ahead of the Federal Reserve's interest rate decision.

The ADP National Employment report showed U.S. private payrolls increased more than expected in April, while a separate reading showed U.S. manufacturing contracted. A measure of prices paid by factories for inputs approached a two-year high. The U.S. central bank is widely expected to hold interest rates at the end of its two-day meeting, after a spate of recent disappointing inflation readings crushed bets of rapid rate cuts this year.

Money markets are pricing in just about 30 basis points (bps) of rate cuts in 2024, down from around 150 bps seen at the start of the year, according to LSEG data. "There's no dot plot, so it's all about the press conference. It's just simply whether (Fed Chair) Powell is more hawkish than his last appearance," said Jay Hatfield, CEO and portfolio manager at InfraCap.

"I would really see how strongly he pushes back on the notion of rate increases." On the company earnings front, Advanced Micro Devices shed 8.9% after its forecast for AI chip sales failed to impress investors, while Super Micro Computer lost 16.8% as the artificial intelligence server maker reported third-quarter revenue below estimates.

The weak results pressured other chip stocks as well, with the Philadelphia Semiconductor Index losing 3.2%. Helping the blue-chip Dow advance, Amazon.com rose 1.8% on better-than-expected quarterly results as interest in artificial intelligence helped drive cloud-computing growth.

Johnson & Johnson added 4.2% after saying it is moving forward with a $6.48 billion proposed settlement of tens of thousands of lawsuits alleging that its baby powder and other talc products contain asbestos and cause ovarian cancer. At 11:34 a.m. ET, the Dow Jones Industrial Average rose 105.13 points, or 0.28%, to 37,921.05, the S&P 500 lost 12.43 points, or 0.25%, to 5,023.26 and the Nasdaq Composite lost 44.69 points, or 0.29%, to 15,613.13

After a rough April, May will further test the performance of equity markets as the first-quarter earnings season continues and the interest rate outlook becomes clearer. Over the last 50 years, the S&P 500 has gained an average of 4.8% between November and April, and just 1.2% between May and October, according to Reuters calculations, giving rise to the popular market adage "Sell in May and Go Away".

Energy shares, down 1.7%, led declines among the 11 S&P 500 sectors. Starbucks dropped 16.4% as the coffee giant cut its annual sales forecast and reported a fall in same-store sales for the first time in nearly three years.

CVS Health plunged 17.2% after the healthcare giant slashed its annual profit forecast and missed Wall Street estimates for first-quarter earnings. Advancing issues outnumbered decliners by a 1.05-to-1 ratio on the NYSE and by a 1.16-to-1 ratio on the Nasdaq

The S&P 500 posted six new 52-week highs and ten new lows while the Nasdaq recorded 27 new highs and 84 new lows.

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