Stock Market Today: Stocks Slump After Alphabet Earnings, Fed Meeting

The main indexes closed lower Wednesday after Alphabet's earnings-related selloff and the Fed's hawkish outlook toward rate cuts.
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(Image credit: Al Drago/Bloomberg via Getty Images)
Stocks were mixed in the lead up to this afternoon's policy announcement from the Federal Reserve, with the tech and communication services sectors woefully underperforming following a batch of poorly received earnings updates. However, selling ramped up across all three main indexes after the Fed indicated it is in no hurry to cut interest rates.  

Around midday, the Dow Jones Industrial Average was up marginally, while the S&P 500 and the Nasdaq Composite were down around 1% apiece. 

Alphabet (GOOGL) was the biggest drag on the S&P 500 and Nasdaq today. Shares of the Magnificent 7 stock plunged 7.5% – shedding $142 billion in market value along the way – as Wall Street weighed disappointing ad revenue over the Google parent's Q4 top- and bottom-line beats. The company also said capital expenditures "will be notably larger" in 2024 vs 2023.

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Fellow mega-cap stock Microsoft (MSFT) created its own headwinds for the indexes, shedding 2.7% despite its fiscal second-quarter results coming in above estimates. Additionally, the company forecast fiscal Q3 revenue to arrive between $60 billion and $61 billion, inline with analysts' estimate for $60.9 billion in sales.

"There was no real weakness in the numbers or guidance," says Louis Navellier, chairman and founder of . "It just wasn't perfect."

Fed gives cautious rate-cut outlook

But today's main event was the conclusion of the January Fed meeting. As was widely expected, the central bank left the federal funds rate at a range of 5.25% to 5.5%. The real anticipation was around the Fed's outlook for potential rate cuts, and disappointment around this is what sparked widespread selling across Wall Street this afternoon. 

Specifically, the indicated 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 the central bank's 2% target.

Fed Chair Jerome Powell reiterated this in his subsequent press conference, saying the central bank "needs confirmation" before it can be confident that inflation is coming down to its target before it reduces rates. Powell added that while it's encouraging how much inflation has declined, there's still "a ways to go.""Although the Fed softened some of its hawkish language, they also suggested it wasn't yet clear that inflation was entirely under control," says Chris Larkin, managing director of trading and investing at E*TRADE from . 

In addition to the sticky inflation numbers we've seen lately, the labor market has remained resilient, Larkin adds. "Friday's jobs data may help clarify the picture in the near term, although even very soft numbers may not be enough to get the Fed to speed up its timeline."

Anthony Denier, CEO of , agrees that "investors need to pay attention to the economic reports, especially those related to inflation and the labor market. The Fed doesn’t want to cut too soon and risk a resurgence of inflation." Denier is expecting the central bank to cut rates three times this year, "probably in June, September and December."

Market still sees a March rate cut 

In December 2023, the Fed's dot plot projected three quarter-point rate cuts this year. However, according to CME Group's , futures traders are pricing in up to six 0.25% rate cuts this year – including a 36% chance of one occurring at the next Fed meeting in March.

At the close, the Dow was down 0.8% at 38,150, the S&P 500 was off 1.6% at 4,845, and the Nasdaq had shed 2.2% to 15,164.

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Senior Investing Editor,
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.