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Stock Market News for Feb 1, 2024

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U.S. stocks ended sharply lower on Wednesday, recording their biggest daily decline of 2024, after the Federal Reserve kept its interest rates steady but said that it would likely not be ready to go for a rate cut in March. All three major indexes ended in negative territory.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) slid 0.8% or 317.01 points to close at 38,150.30 points, recording its biggest single-day decline since December.

The S&P 500 fell 1.6% or 79.3 points, to end at 4,845.65 points, recording its biggest single-day percentage point drop since September. Tech, consumer discretionary and communication services stocks were the biggest losers.

The Technology Select Sector SPDR (XLK) declined 2.1%, while the Consumer Discretionary Select Sector SPDR (XLY) dropped 1.8%. The Communication Services Select Sector SPDR (XLC) lost 2.5%, while the Energy Select Sector SPDR (XLE) gave up 1.9%. All 11 sectors of the benchmark index ended in negative territory.

The tech-heavy Nasdaq slid 2.2% or 345.89 points to finish at 15,164.01 points, recording its worst day since October.

The fear-gauge CBOE Volatility Index (VIX) was up 7.81% to 14.35. Decliners outnumbered advancers on the NYSE by a 3-to-1 ratio. On Nasdaq, a 2.8-to-1 ratio favored declining issues. A total of 13.3 billion shares were traded on Wednesday, higher than the last 20-session average of 11.5 billion.

Fed Dashes Hopes of March Rate Cut

Investors had been awaiting the outcome of the Federal Reserve’s two-day FOMC meeting, which concluded on Wednesday. The meeting was expected to give a clearer picture of the Fed’s next course of action with interest rates.

The Federal Reserve kept its benchmark policy rate unchanged in its current range of 5.25-5.50%, which was widely anticipated after it indicated last year that the central bank’s monetary tightening campaign is likely to end soon and rate cuts would be implemented in 2024.

However, hopes were dashed after Federal Reserve Chairman Jerome Powell said that it is unlikely that the central bank would be ready to go for the first rate cut in March, as inflation is still above its 2% target.

“I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March is the time to do that,” Powell said after the meeting.

Investors were optimistic that cooling inflation could see the Fed go for its first rate cut in March but Powell said that the central bank is closely monitoring the inflation data and more encouraging data is required before rate cuts are implemented.

However, the Federal Reserve sounded a bit dovish as it eliminated the portion of the earlier statement that indicated the central bank retained a tightening bias. Specifically, the Fed did away with the phrase alluding to "additional policy firming."

Powell’s comments dented investors’ sentiment, which took a toll on the stocks, with the tech sector suffering the most. Shares of Alphabet Inc. ((GOOGL - Free Report) ) plummeted 7.5%, recording its worst day since Oct 25.

Shares of Apple Inc. ((AAPL - Free Report) ) and Amazon.com, Inc. ((AMZN - Free Report) ) fell 1.9% and 2.4%, respectively. Amazon has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Treasury yields made wild swings but narrowed their declines after the Federal Reserve issued its revised statement. However, the 10-year Treasury yield remained below the 4% threshold in the market.

Investors also closely watched a spate of big companies report quarterly results but it was overshadowed by the Fed’s meeting.

Economic Data

In economic data released on Wednesday, Automatic Data Processing ((ADP - Free Report) ) reported that private payroll growth fell in January. The U.S. economy added 107,000 jobs in January, lower than December’s upwardly revised 158,000.

Monthly Roundup

Although Wednesday’s sharp decline ate into January’s gains, all three indexes closed the month higher. The Dow rose 1.2% in January. The S&P 500 was up 1.6% for the month, while the Nasdaq added 1%.

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