The S&P 500 extended its recent slide Wednesday after the Federal Reserve kept rates at their highest level in more than 20 years.
The broad index fell 0.3%, deepening its losses from Tuesday, when it registered its largest drop since late January. The tech-heavy Nasdaq Composite fell 0.3%. The Dow Jones Industrial Average rose 0.2%, or roughly 87 points.
Investors had widely expected the central bank to keep rates unchanged, but were on edge for clues about how they might move in 2024 and beyond after a string of firmer-than-expected inflation data.
During his postmeeting press conference, Fed Chair Jerome Powell said it would likely take longer than expected for the central bank to have confidence inflation is moving toward its 2% target. But he also tamped down speculation that the Fed might need to raise rates again to fully control inflation.
"The good news was that there was no major surprise," said Kevin Gordon, senior investment strategist at Charles Schwab. He said the Fed wasn't overreacting to the recent inflation data, but was also signaling that the bar was high for cutting rates.
Stocks had been mixed heading into Powell's comments. They jumped briefly during his remarks, only to later give up those gains.
Investor concerns about inflation and interest rates have been the primary drag on stocks in recent weeks. After a strong start to 2024, the S&P 500 closed out its worst month since September on Tuesday. The index is still up 5.2% this year.
Treasury yields, which largely reflect investor expectations for short-term rates set by the Fed, slid early on in Powell's press conference but then retraced most of those declines. The yield on the 10-year benchmark Treasury note was sitting around 4.63% in late afternoon trading, according to Tradeweb, down from 4.683% Tuesday. It is still up sharply from 3.860% at the end of last year.
The Fed's interest-rate decision and Powell's press conference capped a busy day for traders, who were also confronted with a large batch of economic data and a slew of earnings reports from major companies.
A report of weaker-than-expected manufacturing activity, and drop in job openings, had only a marginal impact on markets, but the earnings reports led to big moves in some stocks.
On the positive side of the ledger, pharmaceutical giant Pfizer gained 6.1% after its first-quarter earnings topped analysts' estimates, thanks in part to signs of resilience in sales of its Covid-19 treatment Paxlovid.
Amazon.com gained 2.3% after the artificial-intelligence boom powered growth in its cloud-computing businesses.
Among laggards, Starbucks fell 16% after the coffee seller reported a sharp slowdown in visits. Weak earnings also drove down CVS Health shares by 17%.