According to the sourceBig tech stocks sent Wall Street into a sharp decline on Wednesday, causing market losses to worsen after the Federal Reserve indicated it likely will not cut interest rates in March, as many traders expected.
The S&P 500 fell 1.6% in its worst day since September, swinging between more modest and steeper losses during a choppy afternoon as traders pushed back their predictions about when the Fed would begin cutting its main interest rate from its highest level since 2001.
The decline in technology stocks dragged the Nasdaq composite to a market-leading loss of 2.2%. The Dow Jones Industrial Average, which has less emphasis on technology, fell a more modest 0.8%, or 317 points.
Alphabet was one of the market’s heaviest weights and shares fell 7.5% despite reporting stronger earnings and revenue for the latest quarter than analysts expected. Beneath the surface, analysts pointed out some worrying trends about how much Google’s parent company makes from advertising.
However, the biggest challenge may have been the high expectations facing the company after how much its stock soared last year. Other Big Tech stocks that also accounted for a disproportionate share of the S&P 500’s rally to a record also struggled Wednesday amid high expectations.
Microsoft shares fell 2.7% despite delivering higher-than-expected earnings and revenue. One analyst, Dan Ives of Wedbush Securities, even called its quarterly report “a masterpiece that should hang in the Louvre.”
Tesla shares fell 2.2%. A Delaware judge ruled Tuesday that its CEO, Elon Musk, is not entitled to the historic compensation package he was previously awarded.
A handful of tech stocks were responsible for most of the S&P 500’s performance last year, and three are scheduled to report their latest quarter results today: Amazon, Apple and Meta Platforms, the parent company of Facebook and Instagram. Expectations are high for them too.
Stocks have hit record highs on hopes that a cooling in inflation will convince the Federal Reserve to cut interest rates several times this year. Such cuts would ease pressure on the economy and encourage investors to pay higher prices for stocks.
But on Wednesday (the Federal Reserve left its main interest rate steady)( and made clear that it “does not expect it to be appropriate” to cut rates “until it has gained greater confidence that inflation is moving sustainably toward” its goal of two percent.
“Given how strong the economy has been,” said Brian Jacobsen, chief economist at Annex Wealth Management,”the Fed probably figures it may err on
the side of cutting later and more slowly than
the market is pricing in.”
Treasury yields in
the bond market rose
and fell following
the Federal Reserve’s announcement.
They had been lower earlier after
the release of a pair
of weaker-than-expected reports on
One report said wage
and benefit growth for American workers was slower in
the final three months
of twenty twenty-three than economists expected.
While all workers would like bigger raises,
colder-than-expected data could further calm what was one
of Fed’s big fears: too large wage increases triggering
a vicious cycle keeping inflation high.
A separate report from ADP Research Institute suggested hiring by non-government employers was softer in January than economists expected.
The Federal Reserve expects labor markets to cool just enough,
to control inflation but not enough cause recession.
A more complete employment report from US government arrives Friday.
In foreign stock markets,
indices fell sharply again China amid continued concerns about weak economic recovery trouble heavily indebted property developers.
Information contributed by Zimo Zhong of The Associated Press