U.S stocks closed lower across the board Wednesday, while Treasury yields and the dollar edged higher as investors looked for clarity on two key issues from today's Federal Reserve interest rate decision and fourth-quarter earnings updates from three megacap tech giants.
The moves followed a surprisingly hawkish statement from the Fed, which removed a reference to making progress on lowering inflation in a statement that followed its decision to hold rates steady at 4.375%.
"Progress of lower inflation has been stalling, something that’s been visible for months now with respect to CPI and core PCE," said Brett Kenwell, U.S. investment analyst at eToro. "The Fed acknowledged that inflation ‘remains somewhat elevated,’ but also signaled more confidence in the economy and the labor market, while specifically citing consumer spending as an area of strength."
Markets were also focused on the release of December quarter earnings updates from Microsoft, Tesla and Meta Platforms amid the ongoing turmoil tied to the emergence of China-based DeepSeek's cut-priced AI agent.
The S&P 500 ended the day 28 points, or 0.47% lower, with the Nasdaq falling 102 points, or 0.51%. The Dow closed 148 points lower.
S&P 500 Closing Bell Heatmap (Jan 29, 2025)$SPY -0.47% 🟥$QQQ -0.51% 🟥$DJI -0.31% 🟥$IWM -0.25% 🟥 https://t.co/5FBCwgwLdc pic.twitter.com/m5qUWfOlO2
— Wall St Engine (@wallstengine) January 29, 2025
Updated at 2:09 PM EST
Fed holds, hints
The Federal Reserve held its benchmark lending rate steady following a two-day policy meeting in Washington, but removed a reference to making progress on slowing inflation that could signal a longer timeframe before the next move lower.
The Fed, as expected, made no changes to its key Fund Funds lending rate, which sits in a range of between 4.25% and 4.5% following the central bank's quarter point reduction in December.
U.S. stocks were little-changed following the Fed decision and statement, with the S&P 500 last marked 38 points lower on the session and the Nasdaq down 171 points. The Dow Jones Industrial Average was last marked 155 points lower.
Benchmark 10-year Treasury note yields rose 2 basis points to 4.575%, with 2-year paper trading 6 basis points higher at 4.265%. The U.S. dollar index, which tracks the greenback against a basket of six global currencies rose 0.14% to 107.071.
Full fed statementhttps://t.co/aA45zM66f1
— AlertsAndNews (@AlertsAndNews) January 29, 2025
Updated at 12:28 PM EST
Chips are down
Nvidia shares are back in the red, and trading around $20 south of the record high it printed on Jan. 7, as the fallout from DeepSeek's AI emergence continues to test the valuations of the world's biggest chipmaker.
The decline also comes amid the Senate confirmation hearing for Howard Lutnik, President Trump's Commerce Secretary nominee, who told lawmakers that DeepSeek has "stole things (and) taken our IP" in developing its AI technogly.
He also said the U.S would pursue new export restrictions, as well as tariffs, to ensure the country maintains its lead over China in AI development.
Nvidia shares were last marked 4.7% higher in early afternoon trading and changing hands at $123.15 each.
BREAKING: Nvidia, $NVDA, extends decline to -6% on the day, erasing -$200 billion of market cap since the market opened.
— The Kobeissi Letter (@KobeissiLetter) January 29, 2025
The majority of yesterday's rebound has now been erased.
DeepSeek appears to be just the tip of the iceberg for AI innovation. pic.twitter.com/u75FtVel9q
Updated at 11:22 AM EST
Session lows
Stocks are heading towards session lows in late morning trading as investor look to this afternoon's slate of megacap tech earnings and the Fed's first rate decision of the year.
The S&P 500 was last marked 24 points, or 0.39% lower, with Apple, Microsoft, Meta and Tesla all trading in the red, while the Nasdaq fell 146 points, or 0.74%.
Treasury yields edge modestly higher, with benchmark 10-year notes pegged at 4.541% while the dollar index pared earlier gains to trade at 108.002.
Related: Microsoft, Meta, Tesla earnings on deck as DeepSeek triggers AI rethink
Updated at 8:26 AM EST
Red again
Premarket declines for Apple and Nvidia are pulling the major benchmarks into the red prior to the start of trading, with Apple down 1.55% following a downgrade from Oppenheimer tied to a weaker iPhone demand outlook.
The S&P 500 was last called 13 points lower, with the Nasdaq looking at a modest 2 point gain at the start of trading. The Dow Jones Industrial Average, meanwhile, is priced for a 50 point pullback.
aiNFT: $AAPL: Oppenheimer Downgrades to Perform from Outperform
— Quant Analytica (@quantanalyticaX) January 29, 2025
"We downgrade APPL from Outperform to Perform due to a 4% cut in our FY26 EPS estimate to $7.95, below the consensus of $8.23. This adjustment reflects lower iPhone sales forecasts for the next 12-18 months, ci…
Updated at 8:12 AM EST
Starbucks redux?
Starbucks (SBUX) shares jumped higher in premarket trading after the world's biggest coffee chain posted its first quarterly earnings under new CEO Brian Niccol.
Niccol, who joined the group last year following a successful stint with Chipotle Mexican Grill (CMG) , called 2025 a "critical" year for the brand, which reported smaller-than-expected comparable sales declines in both the U.S. and China over the three months ending in December.
He's looking to streamline online orders, simplify the broader Starbucks' menu and broaden the group's marketing beyond its loyalty program members.
"We're encouraged by our Q1 results, which demonstrated the effectiveness of our Back to Starbucks strategy," Niccol told investors on a conference call late Tuesday. "Although we are in the beginning chapter and have much more work ahead of us, my thanks goes to our incredible partners across the globe who are unwavering in their commitment to bring our strategy to life."
Starbucks shares were marked 3.3% higher in premarket trading to indicate an opening bell price of $103.61 each.
Related: Starbucks makes major change that will delight customers
Stock Market Today
Stocks ended firmly higher on Tuesday, with Apple (AAPL) pacing gains for all three benchmarks, as investors clawed back some of the early week losses tied to the emergence of China's DeepSeek AI agent.
The AI startup has claimed to have developed an AI-powered model at a fraction of the price needed from U.S. rivals such as Microsoft (MSFT) -backed OpenAI and Meta Platform's (META) Llama 3.
Reports have emerged, however, that DeepSeek may have secretly used high-end Nvidia (NVDA) chips to train its large-language model, with Bloomberg also reporting the Microsoft is probing whether it improperly used OpenAI data.
Those questions, as well as many others linked to the demand forecasts of hyperscalers such as Microsoft and Meta, will be front and center when the pair publish December-quarter earnings after the bell.
ANDREW CABALLERO-REYNOLDS/AFP via Getty Images
Similar questions, although likely skewed toward Elon Musk's self-driving and robotics ambitions, will be put to the Tesla (TSLA) chief executive when he speaks to investors after his company's fourth-quarter update after the close of trading.
"We will be looking to see if Microsoft’s earnings are holding up and the impact of its AI investments on operating income — and whether DeepSeek’s apparent success with generative AI trained on lower-cost infrastructure will pose a challenge for the hyperscalers that have tied themselves closely to Nvidia as well as spending big money on their own custom AI infrastructure," said Forrester analyst Lee Sustar.
Some relief on the AI demand front was offered by Dutch chip-equipment maker ASML Holding (ASML) , whose EUV lithography machines play a key role in complex designs. The company posted near-term bookings of $7.4 billion this morning, more than double analysts' forecasts. The stock was last marked 10% higher in Amsterdam.
Related: Top analyst overhauls Nvidia stock price target as DeepSeek impact lingers
In the meantime, investors will also be focused on the Federal Reserve's first policy meeting of the year, which concludes today in Washington.
Traders aren't expecting any change to the Fed's benchmark lending rate, but reporters are likely to press Chairman Jerome Powell on any changes in the central bank's growth and inflation forecasts stemming from President Donald Trump's myriad policy initiatives.
Treasury bond yields slipped modestly in overnight trading ahead of today's decision, expected at 2:00 p.m. U.S. Eastern Time. Benchmark 10-year notes were trading at 4.526% and 2-year notes were changing hands at 4.197%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.2% higher at 108.078.
Heading into the start of the trading day on Wall Street, stocks look set for modest opening-bell gains with the S&P 500 called 4 points higher from last night's close and the Nasdaq pegged for a gain of around 88 points.
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In overseas markets, ASML's advance helped the Stoxx 600 hit a fresh record high, with the regional benchmark last seen 0.59% higher in Frankfurt trading. Britain's FTSE 100 gained 0.24% in London amid a key economic speech from Finance Minister Rachel Reeves.
Overnight in Asia, Lunar New Year celebrations kept key markets in China and around the region closed, although the MSCI ex-Japan index crept 0.11% higher. In Tokyo, the Nikkei 225 rose 1.02% on the session, a follow-on move to last night's rally on Wall Street.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
