US: Stocks fall as Fed signals more time needed before rate cut

WALL Street stocks slid Wednesday (Jan 31) after the Federal Reserve signalled that more time was needed to cut interest rates, disappointing investors who had hoped for a speedy policy shift.

Major indices finished the day decisively lower, with the S&P 500 down 1.6 per cent at 4,845.65.

The Dow Jones Industrial Average dropped 0.8 per cent to 38,150.30, while the tech-rich Nasdaq Composite Index tumbled 2.2 per cent to 15,164.01.

Fed chairman Jerome Powell said the central bank was unlikely to lower interest rates in March. He pointed to progress in the battle to lower inflation to its two per cent target, while saying more improvement was needed.

“We believe that our policy rate is likely at its peak for this tightening cycle,” Powell told reporters at a press conference after the rate decision.

He added that “almost everyone” on the Fed’s rate-setting committee was in favour of a cut in 2024, but that a move as soon as the next meeting in March was unlikely.

The Fed’s communication was “less dovish than expected, suggesting that the interest rate cutting cycle may start later than many traders were anticipating”, said a note from Matt Weller of Forex.com

While all 11 sectors of the S&P 500 finished in the red, tech shares were especially weak despite solid earnings from Microsoft and Google parent Alphabet. The results were not strong enough to extend a months-long sector rally over artificial intelligence.

Alphabet shares closed 7.4 per cent down while Microsoft lost 2.7 per cent.

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But Boeing jumped 5.3 per cent, regaining some ground despite reporting its fifth straight annual loss. AFP