Stocks declined on Wednesday as earnings reports from Microsoft and Alphabet disappointed investors and pressured the broader market and the Federal Reserve indicated it is not ready to cut interest rates in its latest decision. The Dow Jones Industrial Average lost over 300 points following the central bank's statement, while the and S&P 500 Index fell 1.6% and the tech-heavy Nasdaq Composite lost 2.3%.
Here's how the market settled on Wednesday:
S&P 500 Index (NYSE: SPY): -1.61% or -79.32 points to 4,845.65
Dow Jones Industrial Average (NYSE: DIA): -0.82% or -317.01 points to 38,150.30
Nasdaq Composite Index (NASDAQ: QQQ): -2.23% or -345.89 points to 15,164.01
In the Spotlight: The Federal Reserve on Wednesday held interest rates at their current target range of 5.25% to 5.50%, as central bankers signaled they are not ready to start cutting rates at this time. Notably, the Federal Open Market Committee (FOMC) removed language in its statement that signaled its plan to keep increasing interest rates until inflation is brought down to the Fed's 2% goal. Still, policymakers said there are no plans to cut rates as price pressures remain above that target.
"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," the statement said Wednesday. "In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks."
In remarks following the decision, Fed Chair Jerome Powell said that while the U.S. economy has shown signs of a so-called soft landing as inflation eases without increased unemployment, "inflation is still too high, ongoing progress in bringing it down is not assured and the path forward in uncertain."
However, Powell added that central bankers believe their current "policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."
On the Earnings Front: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) shares traded lower on Wednesday after the tech giant's fourth-quarter ad revenue disappointed Wall Street despite the company reporting better-than-expected revenue and profit last quarter. The company posted 13% revenue growth, marking its fastest increase since 2022, but its ad revenue of $65.52 billion came in slightly below estimates.
Microsoft (NASDAQ: MSFT) shares declined on Wednesday after the megacap software company issued light forward guidance following its stronger-than-expected second-quarter results. For its fiscal third-quarter, Microsoft expects revenue between $60 billion and $61 billion, which is in-line with analyst estimates. During its earnings call, CEO Satya Nadella said Microsoft's Azure AI now as 53,000 customers, with more than 30% of them being new to Azure in the past year.
Starbucks (NASDAQ: SBUX) shares ticked higher on Wednesday despite the coffee chain posting disappointing quarterly results and lowering its full-year 2024 sales outlook as company executives noted that its current challenges are temporary. CEP Laxman Narasimhan said Starbucks' fiscal first-quarter results were impacted by war in the Middle East weakening local sales, a "more cautious" Chinese consumer, and "misperceptions" in the U.S. as many consumers boycott the company following the Israel-Hamas war.
AMD (NASDAQ: AMD) reported in-line fourth-quarter results late Tuesday and issued disappointing first-quarter guidance, pulling shares lower on Wednesday. The chipmaker expects first-quarter sales of about $5.4 billion, plus or minus $300 milion, alongside pressures for its major businesses including impacts to its PC Chips and data center revenues.
"For 2024, we expect the demand environment to remain mixed," CEO Lisa Su said on a call with analysts on Tuesday.
Boeing (NYSE: BA) did not issue forward guidance following its fourth-quarter earnings report on Wednesday, after the aerospace manufacturer narrowed its losses and topped revenue expectations in its final quarter of 2023. The company has been in focus lately after regulators grounded its 737 Max 9 planes following the Jan. 5 incident where a panel door detached from a Alaska Airlines (NYSE: ALK) plane mid-flight.
"While we often use this time of year to share or update our financial and operational objectives, now is not the time for that," CEO Dave Calhoun said in a statement to employees, quoted by CNBC. "We will simply focus on every next airplane while doing everything possible to support our customers, follow the lead of our regulator and ensure the highest standard of safety and quality in all that we do."
In Economic News: Private payrolls in the U.S. declined in January, ADP reported on Wednesday, signalling a warning sign that the labor market is beginning to weaken in response to higher-for-longer interest rates. U.S. companies added 107,000 for the month, below December's downwardly revised print of 158,000 adds and the Dow Jones estimates for 150,000.
The payrolls processing firm's report comes two days before the Labor Department's "official" monthly report scheduled for release Friday morning, which is expects for show 185,000 additions for January.
In Single-Stock News: Shares of Tesla (NASDAQ: TSLA) were impacted on Wednesday after Delaware Chancery Court Chancellor Kathaleen McCormick rejected the company's $56 billion compensation package for CEO Elon Musk late Tuesday, ruling that the electric vehicle maker failed to prove "the compensation plan was fair." The pay out Tesla alloted to Musk in 2019 was the largest compensation package in public corporate history, McCormick said in her ruling.
Walmart (NYSE: WMT) announced a three-for-one stock split late Tuesday, with the additional shares payable after market close on Feb. 23 to shareholders of record as of the previous day. CEO Doug McMillon said in a statement that Walmart "felt it was a good time to split the stock and encourage our associates to participant in the years to come." Separately, the company also announced plans to build or convert more than 150 large-format stores in the United States over the next five years on Wednesday, adding to its already more than 4,600 stores across the country.
Universal Music Group (OTC: VIVHY) said Wednesday it will cease licensing its music to ByteDance's TikTok, accusing the social media platform of intimidation in its contract negotiations. The label, which represents artists including Taylor Swift, said in an open letter to TikTok that it has been calling out three issues to TikTok during contract discussions: "appropriate compensation for our artists and songwriters, protecting human artists from the harmful effects of AI, and online safety for TikTok's users."
This article will be updated throughout the session. Please check back for updates.