Nasdaq ends slightly up, S&P 500 flat as US Fed brings little surprise

NEW YORK - The Nasdaq rose slightly with a boost from chip stocks while the S&P 500 closed virtually unchanged on Jan 28, as investor reactions were muted after the Federal Reserve kept interest rates unchanged as expected and gave little indication when borrowing costs might fall again.

In its statement, the Fed cited still-elevated inflation alongside solid economic growth for its decision. The US central bank said the job market has “shown some signs of stabilisation” and removed language from its prior statement saying that downside risks to employment had risen.

Investors had widely expected the central bank to keep rates unchanged at 3.5 per cent and 3.75 per cent and it said that eight out of 10 policymakers had voted to hold rates steady. After the statement, traders boosted their bets that the Fed would cut short-term borrowing costs in June - but not before then.

And in his closely monitored press conference, Fed chairman Jerome Powell was careful not to comment on future rate decisions, saying that the Fed would be data-dependent, but he told reporters that the upside risks to inflation and downside risks to employment have diminished.

“Whether you were bullish or bearish going into the press conference you walked away feeling about the same,” said Mr Michael James, equity sales trader at Rosenblatt Securities.

“Employment and inflation risks have downsized, but inflation overall remains stubborn. There hasn’t been a meaningful enough change in the employment market to warrant the Fed doing something. There hasn’t been a meaningful enough improvement in inflation to allow the Fed to be more aggressive with further cuts,” Mr James added.

The Dow Jones Industrial Average rose 12.19 points, or 0.02 per cent, to 49,015.60, the S&P 500 lost 0.57 points, or 0.01 per cent, to 6,978.03 and the Nasdaq Composite gained 40.35 points, or 0.17 per cent, to 23,857.45.

The benchmark S&P 500 index had briefly topped the 7,000 points milestone for the first time earlier in the day but couldn’t hold its gains.

Among the 11 major S&P 500 sectors the biggest decliners were real estate, consumer staples and healthcare.

The biggest advances came in energy, up 0.7 per cent and technology, up 0.6 per cent.

Technology’s biggest index point contributions came from chip stocks with earnings reports in focus.

The biggest boost was from AI chip leader Nvidia, up 1.6 per cent, followed by Micron, which rose 6 per cent and then Intel, which jumped 11 per cent.

Earlier, SK Hynix, a key Nvidia supplier, reported a record quarterly profit and ASML booked its highest ever fourth-quarter orders, igniting a tech rally from Europe to Asia.

Texas Instruments shares jumped 9.9 per cent after the analog chipmaker forecast first-quarter revenue and profit above Wall Street estimates late on Jan 27.

Seagate Technology shares finished up more than 19 per cent after it forecast third-quarter revenue and profit above Wall Street expectations, and its rival Western Digital also rallied 10.7 per cent.

‘Mag 7’ kicks off earnings

After digesting the Fed update, investors then turned their attention to the kickoff of earnings from the so-called “Magnificent Seven” companies, which have driven the AI trade, powering markets to record levels.

Meta and Tesla shares gained nearly 4 per cent and 3 per cent respectively, in late trading after their reports were released following the market close. While Microsoft shares fell more than 3 per cent after its report was released, shares in bellwether IBM jumped 7 per cent following its results.

With lofty valuations driving rotation into undervalued areas of the market, the group’s capital plans are being closely watched as investors question whether AI spending will drive returns.

Elsewhere in earnings, shares in AT&T rose after the US carrier projected annual profit above market expectations.

In industrials, however, Textron shares sank 7.9 per cent after it guided for a fiscal profit below estimates, while Otis stock slipped after its fourth-quarter revenue missed expectations.

Declining issues outnumbered advancers by a 1.37-to-1 ratio on the NYSE where there were 593 new highs and 97 new lows.

On the Nasdaq, 1,710 stocks rose and 3,029 fell as declining issues outnumbered advancers by a 1.77-to-1 ratio. The S&P 500 posted 38 new 52-week highs and 14 new lows while the Nasdaq Composite recorded 102 new highs and 125 new lows.

On US exchanges, 19.03 billion shares changed hands compared with the 18.29 billion 20-day moving average. REUTERS