Stocks On Wall Street Turn Lower Ahead of Fed's Rate Decisions

Barry Adams
01 May, 2024
New York City

With all eyes on the Federal Reserve, benchmark indexes in early trading edged lower and extended the previous session's losses. 

The S&P 500 index and the Nasdaq Composite declined 0.2% ahead of the Federal Reserve's rate decisions and comments on the level of interest rates. 

At the start of the year, the Fed had raised expectations of as many as four rate cuts in the year and suggested that while the economy is strong, there has been considerable progress in curbing inflationary pressures. 

However, as the year progressed, those expectations of rate cuts were dashed after inflation stalled near 3%, primarily because of the elevated inflation in the service sector. 

The Federal Reserve has raised interest rates eleven times between March 2022 and July 2023, lifting rates from zero to 5.5%. 

But as inflation began to ease from the 40-year high peak of 9.1% in June 2022 and hovered above 3% in the second half of 2023 and first quarter of 2024, investors expectations rose that the Fed may have flexibility in decreasing rates as early as June. 

However, progress in bringing down inflation to a 2% annual rate has stalled in the last six months, amid a resilient economy and moderating but tight labor market conditions. 

The Fed's own projection on inflation at the beginning of the year also stoked speculation that policymakers are laying the groundwork for rate cuts in the second half. 

The latest updates on inflation indicators, nonfarm payrolls, GDP growth, retail sales, and durable goods orders suggested that rates are not restrictive enough and wages are rising at rates not commensurate with the Fed's inflation target rate of 2%. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.1% to 5,015.04, and the Nasdaq Composite fell 0.3% to 15,582,72. 

The yield on 2-year Treasury notes edged higher to 5.04%, 10-year Treasury notes inched higher to 4.68%, and 30-year Treasury bonds edged lower to 4.78%.

WTI crude oil decreased $1.48 to $80.45 a barrel, and natural gas prices decreased 5 cents to $1.93 a thermal unit.

Gold increased by $3.36 to $2,294.30 an ounce, and silver rose 11 cents to $26.48. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 106.29.

 

U.S. Stock Movers

Starbucks Corp. dropped 13% to $77.0 after the coffee chain operator reported weaker-than-expected revenue and earnings in the first quarter. 

Pinterest soared 16.6% to $39.03 after the social media company reported better-than-expected revenue and earnings in the first quarter. 

Super Micro Computer dropped 14% to $738.50 after the company announced lower-than-expected third-quarter revenue of $3.85 billion and higher-than-expected adjusted earnings per share of $6.65. 

Amazon.com rose 1.6% to $177.85 after the online retailer and cloud services provider reported better-than-expected revenue and earnings in the first quarter after advertising revenue soared 24%. 

The company said revenue in the current quarter is expected to range between $144 billion and $149 billion, representing an increase between 7% and 11%. 

The Amazon Web Services business soared 17% to $25 billion, calming the worries that the division's growth had topped out following slower growth last year. 

AMD fell 6.8% to $147.70 after the advanced chipmaker reiterated its full-year outlook, dampening expectations of sales and earnings revisions.