4:10pm: Big Tech earnings ahead
The Nasdaq closed lower on Wednesday, dropping 0.5% or 103 points to end the session at 19,630.
The tech-heavy index's decline was mirrored by the broader market, with the S&P 500 also falling 0.5% or 28 points to close at 6,039. The Dow Jones fared slightly better but still ended in negative territory, shedding 0.3% or 137 points to finish at 44,714.
The market's downturn came as the Federal Reserve announced its decision to leave interest rates unchanged, maintaining the target range at 4.25% to 4.5%. Investors were particularly attentive to Fed Chair Jerome Powell's remarks, given the recent start of President Donald Trump's second term and their historically tense relationship.
Tech stocks, which have been driving much of the market's momentum, faced pressure. Nvidia, which has been volatile due to recent developments in the AI sector, continued to experience fluctuations. Investors are now turning their attention to upcoming earnings reports from major technology companies, with Microsoft, Meta, and Tesla scheduled to release their quarterly results after the closing bell.
3:12pm: Renewed tensions
The Fed’s decision to hold interest rates steady comes as President Donald Trump advocates for lower rates, raising concerns about economic stability, according to deVere Group CEO Nigel Green.
“The Fed’s decision to hold rates was expected, but the real story here is the renewed tension between the White House and the central bank,” Green said.
“His administration has already signaled its preference for lower interest rates, but that does not mean the Fed will, or should, comply without considering the economic consequences. Policies such as tariffs and mass deportations could further complicate the inflation outlook and force the central bank into a defensive stance.”
Gina Bolvin, Bolvin Wealth Management Group president, added it was no surprise the Fed is on hold. "Even they have to wait and see Trump’s policies on taxes, immigration, deregulation and tariffs before they cut rates," Bolvin said.
"Stocks will continue to rely on fundamentals, and so far, so good. It’s a good start to the earnings season, and GDP growth is 3%."
2:42pm: Rates unchanged
The Federal Reserve announced it will maintain its benchmark interest rate in the range of 4.25% to 4.5%, marking a pause after three consecutive rate cuts in late 2024.
While the move was expected by analysts, it comes amid a backdrop of persistent inflation, which was recorded at 2.9% year-over-year in December. Despite a decrease from a peak of 9.1% in June 2022, inflationary pressures continue to be felt, particularly in sectors like gasoline, food, and housing.
In its statement, the Fed removed language referring to progress towards its 2% inflation goal, instead stating “inflation remains somewhat elevated.” This new language signals the Fed is taking a more cautious approach to cutting rates in the near term.
US stocks traded lower following the Fed’s decision and as investors await earnings reports from tech giants Meta, Microsoft and Tesla. The Nasdaq was down 0.8%, the S&P 500 was down 0.6% and the Dow Jones fell 0.3%.
1:20pm: Can the market sustain a rally?
While the Federal Reserve is not expected to change interest rates in its upcoming statement, market attention will be on Fed Chair Jerome Powell’s tone.
Rania Gule, Senior Market Analyst at XS.com highlights political pressure from the White House, particularly from President Trump, who has called for rate cuts. However, according to Gule, the Fed’s independence suggests it is unlikely to yield to such demands.
Market reaction will hinge on the Fed’s stance—any dovish signals could sustain Wall Street’s rally, while hints of tighter policy may trigger volatility.
"While the economy shows some signs of slowing, stock markets are still supported by positive momentum amid cautious anticipation of the Fed’s decision," Gule commented.
"The key question remains: can the market sustain its rally despite these challenges, or will a negative signal from the Fed or an escalation in the trade war trigger renewed volatility? The coming days will provide the answer, but for now, it is clear that markets are walking a fine line between optimism and risk."
12.30pm: Trade data
US net trade and inventories are likely to have dragged heavily on GDP growth at the end of last year, new data suggests.
The US goods trade deficit surged to $122.1 billion in December, the Census Bureau revealed, up from $103.5 billion the preceding month and well above the consensus forecast of $105.5 billion.
"The blowout in the goods trade deficit takes it to a record high," said Oliver Allen, senior US economist at Pantheon Macroeconomics.
Roughly two-thirds of the widening in the deficit last month reflected a swing in the volatile industrial supplies and food balance to a 4% slump, while imports surged 13.6%.
"Some of that jump likely will unwind this month, but it seems reasonable to think that a substantial share is due to attempts to import raw materials before prices potentially jump after the imposition of new tariffs," said Allen.
"Those pre-emptive purchases probably continued into January given the threat to impose 25% tariffs on imports from Canada on Mexico from February 1.
"A similar wave of pre-emptive buying is likely putting upward pressure on underlying imports too, helping to explain the 3.9% jump last month. The 4.8% drop in underlying exports in December is harder to explain."
Allen said the goods trade deficit was considerably higher on average in the fourth quarter overall compared to the third, with monthly trade data suggesting net trade subtracted roughly one percentage point from headline GDP growth in the quarter.
GDP growth of around 1%, if not a bit lower, now seems quite likely, the economist said.
11:05am: Reframing the narrative
Big tech earnings are set to take center stage tonight as Tesla, Microsoft, Meta and IBM are all due to report after the bell.
Investors are hoping that the companies will help to refocus attention on the dominance of the US tech sector following news of the new AIs coming on stream from China.
"Investors will be hoping that tonight’s trio of titans will repeat Netflix’s trick from last week and provide good news in spades," said Chris Beauchamp, Chief Market Analyst at online trading platform IG.
"ASML set the stage today with better figures, but sentiment remains brittle following Monday’s volatility.”
9.41am: Muted start as attention turns to Fed
Wall Street faced a mixed start on Wednesday, as the Nasdaq and S&P 500 both moved into negative territory ahead of the Federal Reserve’s latest interest rate call.
The Nasdaq dropped 0.4% as trading got underway, as the S&P 500 fell 0.2% and Dow Jones headed just above the mark.
T-Mobile US Inc and Starbucks Crop were among early risers, up 8.0% and 6.5% respectively, after both beating estimates in their latest quarterly earnings.
ASML Holding NV also rallied, as results helped the chip equipment maker bounce back after Monday’s DeepSeek-fuelled tech sell-off.
Nvidia Corp, which had been particularly hit, faced further pressure, dropping 2.7% after the bell.
8.01am: Mixed start seen
Wall Street appeared on course for a muted start as attention turned to the Federal Reserve’s latest interest rate call after a volatile start to the week.
Futures had the Nasdaq up 0.4% as it looked to recover further from a hammering on the back of Monday’s DeepSeek-sparked global tech sell-off.
The Dow Jones and S&P 500 were seen moving just below the mark in the meantime.
Nvidia Corp, having clawed back an 8.9% gain on Tuesday after Monday’s 16.9% drop, fell in pre-market trading once again.
Expectations are for the Federal Reserve to hold interest in its meeting later on Wednesday, though focus will be on the central bank’s outlook,” according to analysts.
“For the Fed, the question is more about how long the pause will be rather than whether they will cut this time around,” Scope Market’s Joshua Mahony said.
“The fears of an inflationary push under Donald Trump provides the basis for a cautious approach over the coming months, with markets currently pointing towards a likely wait until June until we see the first rate cut of the year.”