S&P 500, Nasdaq end lower after Fed rate decision, Powell press conference

Speak of a schizophrenic market, this was no seesaw action today but rather the battle of the bulge with all the indexes dancing near flat the entire session, then suddenly zooming way into the black from 2 pm to 3 pm, then just as suddenly back down until close. The Dow was up nearly 550 points by 3 pm before falling, the S&P and Nasdaq spending almost all day in the red except for from 2-3 pm.  How to explain this except that the market got exactly what it was expecting – no Fed rate change. 

It must have been at 2 pm that Powell made the announcement that there were no plans for a future rate hike. This market that has been so keen on the timing of rate cuts has now seemingly reversed course and decided to settle on no rate hikes so this announcement caused the aforementioned rally.  As today’s expert put it, “today’s rally was when he said the next move will not be a hike. He pushed back against that, hard … That allowed the bulls to take charge.” Other good news is that of the 310 S&P companies reporting thus far, 77% have beaten estimates and Q1 earnings growth is now expected at 6.6%, way above the 5.1 a month ago. Volume for once was also above average at 12.26 billion. 

S&P 500, Nasdaq end lower after Fed rate decision, Powell press conference

By Stephen Culp

Wed May 1, 2024 4:26 PM

DJ: 37,815.92  -570.17        NAS: 15,657.82  -325.26        S&P: 5,035.69  -80.48      4/30

DJ: 37,903.29  +87.37         NAS: 15,605.48  -52.34           S&P: 5,018.39  -17.30      5/1

NEW YORK, May 1 (Reuters) - U.S. stocks closed mixed on Wednesday after the Federal Reserve left its key interest rate unchanged, as expected, and indicated that while its next move will likely be a rate cut, continued progress on inflation is not assured.  The S&P 500 and the Nasdaq ended lower while the Dow Jones Industrial Average notched a modest gain.  The Federal Open Markets Committee concluded its two-day monetary policy meeting with a unanimous decision to let the Fed funds target rate stand at 5.25%-5.50%.  The accompanying statement left the timing of any rate cut in doubt, and Fed officials underscored their concern that the first months of 2024 have done little to build the confidence they seek in falling inflation.  At the subsequent press conference, Fed Chair Jerome Powell suggested that while the central bank remains focused on bringing inflation back to its 2% target, he noted progress toward that goal and dismissed the notion of an imminent rate hike.

"Powell didn't rock the boat very much," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "He acknowledged that inflation is still a problem but remained optimistic that it will improve over the coming quarters."  "What sparked today's rally was when he said the next move will not be a hike," Detrick added. "He pushed back against that, hard. ... That allowed the bulls to take charge."  Powell said the labor market was normalizing, citing data released on Wednesday showing job openings dropping to a three-year low.

First-quarter reporting season has breezed passed the halfway point, with 310 of the companies in the S&P 500 index having reported. Of those, 77% posted consensus-beating earnings, according to LSEG.  Analysts now expect aggregate first-quarter S&P 500 earnings growth of 6.6% year-on-year, a significant improvement over the 5.1% estimate as of April 1, LSEG data showed.

Among individual companies, Advanced Micro Devices (AMD.O), opens new tab shed 9.0% after its disappointing artificial intelligence chip sales forecast, while Super Micro Computer (SMCI.O), opens new tab slid 14.0% following the company's quarterly revenue miss.  The weak results pulled the Philadelphia Semiconductor Index (.SOX), opens new tab 3.5% lower.  Amazon.com (AMZN.O), opens new tab rose 2.2% on better-than-expected quarterly results as interest in AI helped drive cloud-computing growth.  Johnson & Johnson (JNJ.N), opens new tab advanced 4.6% after it said it will proceed with a proposed $6.48 billion lawsuit settlement over allegations that its baby powder and other talc products cause ovarian cancer.  Starbucks (SBUX.O), opens new tab tumbled 15.9% after the coffee chain cut its sales forecast as it posted the first drop in same-store sales in nearly three years.  CVS Health (CVS.N), opens new tab plunged 16.8% after the healthcare company's earnings fell short of consensus and it slashed its annual profit forecast.

The Dow Jones Industrial Average (.DJI), opens new tab rose 87.37 points, or 0.23%, to 37,903.29, the S&P 500 (.SPX), opens new tab lost 17.3 points, or 0.34%, to 5,018.39 and the Nasdaq Composite (.IXIC), opens new tab dropped 52.34 points, or 0.33%, to 15,605.48.  Of the 11 major sectors in the S&P 500, energy shares (.SPNY), opens new tab recorded the largest percentage loss, while utilities (.SPLRCU), opens new tab led the gainers.

Advancing issues outnumbered decliners on the NYSE by a 1.38-to-1 ratio; on Nasdaq, a 1.50-to-1 ratio favored advancers.  The S&P 500 posted 12 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 55 new highs and 105 new lows.

Volume on U.S. exchanges was 12.26 billion shares, compared with the 11.08 billion average for the full session over the last 20 trading days.