Stocks gyrated on Wednesday as the Federal Reserve paused its rate-hiking campaign and signaled it was making progress on fighting inflation.
But at the same time, the central bank indicated it would hike another two times later this year.
The S&P 500 eked out a narrow gain, rising 0.08% to close at 4,372.59. The Nasdaq Composite added 0.39% to close at 13,626.48, supported by gains in Nvidia and AMD. The Dow Jones Industrial Average dipped 0.68%, or 232.79 points, to finish the session at 33,979.33, dragged down by losses in UnitedHealth.
During the session, both the S&P 500 and the Nasdaq touched their highest levels since April 2022.
As traders were expecting, the Fed kept interest rates unchanged at a target range of 5%-5.25% on Wednesday afternoon, ending a streak of 10 consecutive hikes.
Despite the pause, the markets' initial reaction was negative as investors focused on the the central bank's projections for the rest of the year, which indicated the Fed would restart rate hikes before long.
"The statement and projections were so hawkish, that I'm sure Wall Street is thinking they should have just raised rates today," said Ed Moya, senior market analyst at Oanda. "The Fed is going to send this economy into a recession next year if they follow through" on their forecast.
However, the sell-off stabilized somewhat as Fed Chair Jerome Powell said at his press conference Wednesday afternoon that the central bank hadn't yet made a decision about July's meeting. He also said the Fed was making progress against inflation.
"I would almost say that the conditions that we need to see in place to get inflation down are coming into place," the central bank leader said.
The Fed next meets July 25-26. The S&P 500 is up more than 13% this year and more than 25% from its bear market low as investors bet the Fed would soon stop hiking rates.
Earlier Wednesday, May's producer price index, an indicator of the path of inflation, fell 0.3%, a larger decrease than expected. On Tuesday, May's reading of the consumer price index, which showed the lowest annual increase in more than two years, bolstered investor hopes that the Fed was winning its war against inflation.
"What I think Powell kind of helped smooth over the course of his press conference is that the Fed is still on track with how the market is thinking on policy," said Anthony Saglimbene, chief market strategist at Ameriprise Financial. "They're leaving themselves room to increase rates if needed."
S&P 500 closes little changed after volatile trading session
The S&P 500 notched a small gain after a volatile trading session that saw the key index briefly reach a fresh 13-month high.
The broad-market index rose 0.08% to close at 4,372.59.The Nasdaq Composite added 0.39% to close at 13,626.48. The Dow Jones Industrial Average dipped 0.68%, or 232.79 points, to finish the session at 33,979.33, dragged down by losses in UnitedHealth.
Stocks were tense after the Federal Reserve paused rate hikes in June, but indicated two more increases could follow this year. Fed chair Jerome Powell said a decision hasn't yet been made as to policy at the July FOMC meeting.
— Brian Evans
Piper Sandler calls Shake Shack 'best idea' in restaurant sector
Piper Sandler initiated coverage of Shake Shack with an overweight rating on Tuesday, calling the stock its "best idea" in the restaurant sector.
Shake Shack is showing a real focus on improving restaurant level margins this year and has deliberately introduced the word "discipline" when discussing development, analyst Brian Mullan wrote in a note to clients.
While the stock is already up 72% year to date, he's betting on more upside ahead. His $84 price target suggests nearly 20% upside from Tuesday's close.
"From here, our view is that if SHAK can 'prove out' that RLMs can sustainably be 20% or better at
the same time that it can "prove out" that cash on cash returns for all new development classes can be 30% or better, it won't be long before investors start to assign far more credit for the long- term unit growth opportunity that SHAK has in front of it," Mullan said.
— Michelle Fox
Powell reassured markets, Ameriprise strategist says
Fed Chair Jerome Powell's press conference helped reassure markets that the central bank's outlook was similar to what markets had expected before Wednesday's policy announcement, Ameriprise Financial chief market strategist Anthony Saglimbene told CNBC.
"What I think Powell kind of helped smooth over the course of his press conference is that the Fed is still on track with how the market is thinking on policy. ... They're leaving themselves room to increase rates if needed," Saglimbene said.
There are also signs from Powell's press conference and the economic projections that a "soft landing" is still on the table, Saglimbene said.
"While services inflation is still elevated, inflation is developing in the way they wanted," Saglimbene added.
— Jesse Pound
Berenberg gets bullish on Estée Lauder
Berenberg got off the sidelines on Estée Lauder as the firm keeps up hope of a recovery in the Chinese beauty market.
"The market has lost faith in China beauty; we have not," analyst Fulvio Cazzol said in a note to clients when upgrading shares to buy from hold.
"Following the relaxation of COVID-19 restrictions in December, beauty consumption trends in China are recovering, albeit at a slower pace than initially expected," he added. "However, the rise in passenger traffic and consumer confidence since December, the rise in household savings rates and responses from our recent consumer survey suggest it may be premature to lose faith in a recovery."
Cazzol's price target of $243 implies shares could rally 31.6% over the next year from Tuesday's close. That would mark a tide change for the stock, which is up more than 3% in Wednesday's session but has lost 23.3% since 2023 began.
— Alex Harring
Nasdaq and S&P 500 turn positive as investors watch Powell
The technology-heavy Nasdaq was last up 0.5% shortly after 3 p.m. ET, after trading as much as 0.9% down earlier in the session. The broad S&P 500 rose 0.5% despite previously seeing a session low of 0.7% down.
The Dow lagged, still trading down about 0.5%.
— Alex Harring
Goldman boosts price target on AMD
Goldman Sachs raised its price target on AMD to $137 from $97 Wednesday, a day after the chipmaker revealed its newest artificial intelligence chips. AMD also said its most advanced GPU for AI, the MI300X, will start shipping to customers later this year.
The new price target implies 10% upside from Tuesday's close.
"In data center GPUs, while predicting AMD's revenue potential is difficult, particularly given the level of customer concentration that is inherent to this business, we expect AMD to grow into a credible second supplier over the medium- to long-run, and await tangible evidence of customer design wins with the MI300A and/or MI300X," Goldman analyst Toshiya Hari wrote in a note to clients.
Shares were up about 2% in midday trading.
— Michelle Fox
'Powell throws cold water on the market,' wealth manager says
Markets aren't liking the Fed decision and commentary, according to Gina Bolvin, president of Bolvin Wealth Management.
"Oops he did it again," Bolvin said. "Powell throws cold water on the market."
All three of the major indexes traded down shortly before 2:45 p.m. ET.
— Alex Harring
Workers are spending more time at the office, but thinking about getting away
Bank of America's latest consumer survey shows 60% of those polled are no longer working from home for the majority of the work week. This mirrors the data from Kastle, which showed office occupancy above 50% for the first time since March, in the week ended June 7. Gains in occupancy were seen in all 10 cities Kastle tracks for its gauge.
More time in the office, has many of those polled thinking about vacations. More than a third of those surveyed said they planned to spend more on vacation travel in the coming year, Bank of America said.
Overall, spending levels were looking a little "less stingy" compared with its March survey, but spending plans were still trending negatively for home furnishings and decor and consumer electronics, it said.
—Christina Cheddar Berk
Consumer staple stocks avoid broader market slide
Consumer staple stocks in the S&P 500 were able to buck the broader index's leg down as investors digested the June Fed policy announcement.
Despite the index as a whole trading down about 0.5%, the consumer staples sector was up around 0.4%. It was the sole sector of the 11 in the S&P 500 that traded up shortly after 2:15 p.m. ET.
Information technology, the next best performing index, gyrated around the flatline. Energy and health care were the two worst performing sectors, with each down more than 1%.
— Alex Harring
Stocks hit session lows after Fed announcement
The party is just about over for the big market rally, BTIG’s Krinsky says
It's been a spectacular 2023 run for the market, but the music is about to stop, according to Jonathan Krinsky, chief market technician for BTIG.
"The rubber band continues to get stretched to the upside, and our view remains that we are at the tail end of this parabolic move for the Nasdaq," he said in a Wednesday report. Indeed, the Nasdaq Composite is up 30% for the year.
He highlighted that the Invesco QQQ Trust (QQQ) is 10.5% above its 50-day moving average, and 22.7% above its 200-day moving average, marking the top 3% of all readings since 1999 and the top 1.5% of all readings after 2002.
"Does that mean it can't go higher? No, but it does mean the risk/reward is extremely poor in the near-term," he wrote.
He added that areas including semiconductors and homebuilders, per the VanEck Semiconductor ETF (SMH) and the iShares U.S. Home Construction ETF (ITB), are also showing extremes. Indeed, both SMH and ITB hit fresh highs on Wednesday. "Again, all of these trends are clearly established, but a tactical unwind looks increasingly likely, in our view," Krinsky said.
Nvidia hits new record high
Nvidia jumped about 2% Wednesday to hit a new all-time high of $422.76, once again topping a $1 trillion market capitalization. The chipmaker has been the biggest beneficiary of the artificial intelligence craze on Wall Street, climbing 186% this year.
— Yun Li
See the stocks making the biggest midday moves
These are the stocks making the biggest midday moves:
- Logitech — Shares tumbled 12.3% after the company announced president and CEO Bracken Darrell is departing. Citi downgraded shares to neutral from buy following the announcement.
- UnitedHealth — UnitedHealth dropped 7% after CFO John Franklin Rex said more seniors are getting medical procedures they delayed during the pandemic, according to a FactSet transcript of a presentation made Tuesday at the Goldman Sachs Global Healthcare conference. It's a trend that means rising costs for the health insurance company. Other insurers also dropped. Humana slid 13%.
- Toyota — The Japan-based automaker's shares gained 4.5% Wednesday. Shareholders