US close: Stocks give up gains as Fed signals March hike

Wall Street stocks had given up their gains by the end of trading on Wednesday, as investors digested a Fed that was “of a mind” to raise interest rates as soon as March.

At the close, the Dow Jones Industrial Average was down 0.38% at 34,168.09 and the S&P 500 lost 0.15% to 4,349.93, while the Nasdaq Composite clung to gains of just 0.03%, to 2.82 points, to settle at 13,542.12.

The Dow closed 129.64 points lower on Wednesday, reversing its steady gains from earlier in the session as corporate earnings news gave way to the much-anticipated Fed decision.

“The Fed kept the federal funds rate target unchanged, and in a move widely anticipated by markets suggested economic conditions warrant an imminent increase in the federal funds rate, setting the stage for liftoff in March,” said Mickey Levy at Berenberg Capital Markets.

“Alongside its policy statement, the Fed also published a statement outlining general principles that will govern future balance sheet reduction, although specific details with respect to pace and timing have been left to a future meeting.

“In line with market expectations, the Fed refrained from hastening the end of its large-scale asset purchase programme, which will end in early March as announced by the Fed at its December meeting.”

Levy noted that the Federal Reserve’s policy statement pointed to a “strong labour market” and “inflation well above 2%” as factors that would justify an imminent increase in the federal funds rate, although the central bank refrained from explicitly characterising labour market conditions as consistent with maximum employment in its policy statement.

“Critically, Powell emphasised throughout his press conference that current economic conditions - which include historically tight labour markets, accelerating wage gains, and the prospects of prolonged supply constraints - pose significant upside inflation risks.”

Following its two-day policy meeting, the Federal Open Market Committee (FOMC) stood pat on interest, keeping the federal funds rate at 0.25%, although the central bank made it clear that hikes were just around the corner.

“I would say the committee is of a mind to raise the federal funds rate at the March meeting assuming that conditions are appropriate for doing so,” Federal Reserve chair Jerome Powell told a media conference after the meeting.

The question of reducing the Fed’s balance sheet was less clear, however, with Powell saying that it could start “later this year”, although he said it would happen “sooner and faster” than it has previously.

“We are going to be led by the incoming data and evolving outlook,” Powell said.

On the macro front, mortgage applications fell 7.1% in the week ended 21 January - the sharpest decline in two months - with the Mortgage Bankers Association’s refinancing index plunging 12.6% and the purchase index slipping 1.8%.

Elsewhere, the US goods trade balance hit an all-time high of $101.0bn in December, ahead of estimates for $96.0bn and November's revised print of $98.0bn, according to an advance estimate from the Census Bureau.

Imports rose 2% to $258.26bn and exports rose at a slower 1.4% clip to $157.3bn

Lastly, new home sales rose 11.9% from a month earlier to a seasonally adjusted annual rate of 811,000 in December, following a similar increase in November and easily beating market expectations of 760,000 to hit their highest level since March 2021.

In the corporate space, Boeing descended 4.82% after missed Street expectations on revenue and losses per share in the fourth quarter and took a $3.5bn pre-tax charge on its 787 Dreamliner programme, although it did achieve positive cash flow for the first time since 2019.

Home appliances manufacturer Whirlpool, which owns brands including KitchenAid, Indesit and Jenn-Air, was down 0.22% at the close ahead of its after hours earnings release.

The company reported a record full-year net earnings margin of 8.1%, up 260 basis points, and a record ongoing EBIT margin of 10.8%, ahead 180 basis points, fully offsetting $1bn in raw material inflation.

On the upside, Microsoft rose 2.85% after the computing topped expectations on its quarterly revenues guidance.

Electric automaker Tesla was ahead 2.07% after beating the Street on both the top and bottom line in its latest numbers, while chipmaker Intel added 1.35% after it reported fourth quarter revenue of $20.5bn, exceeding its October guidance by $1.3bn and making for year-on-year growth of 3%.

Dow Jones - Risers

Microsoft Corp. (MSFT) $296.71 2.85%
Visa Inc. (V) $205.87 1.92%
Intel Corp. (INTC) $51.69 1.35%
American Express Co. (AXP) $175.32 1.28%
JP Morgan Chase & Co. (JPM) $147.92 0.95%
Johnson & Johnson (JNJ) $168.38 0.45%
Unitedhealth Group Inc. (UNH) $458.43 0.35%
Goldman Sachs Group Inc. (GS) $342.68 0.33%
Chevron Corp. (CVX) $132.69 0.08%
Dow Chemical Co. (DOW) $57.06 0.07%

Dow Jones - Fallers

Boeing Co. (BA) $194.27 -4.82%
Verizon Communications Inc. (VZ) $51.02 -3.55%
3M Co. (MMM) $169.30 -2.56%
Walgreens Boots Alliance, Inc. (WBA) $49.76 -2.41%
Walt Disney Co. (DIS) $133.60 -2.13%
Salesforce.Com Inc. (CRM) $211.00 -2.04%
Cisco Systems Inc. (CSCO) $55.33 -1.39%
International Business Machines Corporation (CDI) (IBM) $134.26 -1.35%
Amgen Inc. (AMGN) $222.54 -1.11%
Nike Inc. (NKE) $144.14 -1.02%

S&P 500 - Risers

Corning Inc. (GLW) $39.24 11.16%
Archer-Daniels-Midland Co. (ADM) $72.27 5.70%
Mattel Inc. (MAT) $20.46 4.33%
Broadcom Inc. (AVGO) $557.12 4.30%
Macerich Co (MAC) $17.18 2.87%
Microsoft Corp. (MSFT) $296.71 2.85%
KLA-Tencor Corp. (KLAC) $380.60 2.83%
Schlumberger Ltd. (SLB) $39.80 2.60%
Analog Devices Inc. (ADI) $159.77 2.57%
Microchip Technology Inc. (MCHP) $74.39 2.55%

S&P 500 - Fallers

Discovery Inc. Class A (DISCA) $24.40 -9.16%
Automatic Data Processing Inc. (ADP) $197.46 -8.95%
Discovery Inc. Class C (DISCK) $23.88 -8.92%
AT&T Inc. (T) $24.25 -8.42%
F5 Inc. (FFIV) $202.65 -8.36%
Hasbro Inc (HAS) $89.69 -6.16%
TE Connectivity Ltd (TEL) $140.72 -5.68%
Clorox Co. (CLX) $164.75 -5.62%
CF Industries Holdings Inc. (CF) $67.80 -5.12%
Rollins Inc. (ROL) $29.71 -4.99%

Nasdaq 100 - Risers

Broadcom Inc. (AVGO) $557.12 4.30%
Microsoft Corp. (MSFT) $296.71 2.85%
KLA-Tencor Corp. (KLAC) $380.60 2.83%
Analog Devices Inc. (ADI) $159.77 2.57%
Microchip Technology Inc. (MCHP) $74.39 2.55%
Texas Instruments Inc (TXN) $178.33 2.51%
Henry Schein Inc. (HSIC) $74.47 2.41%
Tesla Inc (TSLA) $937.41 2.07%
Nvidia Corp. (NVDA) $227.72 2.01%
Alphabet Inc. Class C (GOOG) $2,584.80 1.98%

Nasdaq 100 - Fallers

Automatic Data Processing Inc. (ADP) $197.46 -8.95%
Hasbro Inc (HAS) $89.69 -6.16%
Workday, Inc. (WDAY) $225.04 -4.69%
Paychex Inc. (PAYX) $113.57 -4.38%
Illumina Inc. (ILMN) $331.78 -3.76%
Dollar Tree Inc (DLTR) $127.60 -2.85%
Hologic Inc. (HOLX) $68.16 -2.67%
Mercadolibre Inc. (MELI) $975.64 -2.60%
Idexx Laboratories Inc. (IDXX) $466.52 -2.44%
Comcast Corp. (CMCSA) $48.46 -2.44%