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Wall Street Drifts Ahead of Fed 05/01 09:51
U.S. stocks are drifting Wednesday as Wall Street waits to hear from the
Federal Reserve about where interest rates may be heading.
NEW YORK (AP) -- U.S. stocks are drifting Wednesday as Wall Street waits to
hear from the Federal Reserve about where interest rates may be heading.
The S&P 500 was down 0.3% in morning trading, coming off its first losing
month in the last six. The Dow Jones Industrial Average was up 49 points, or
0.1%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was 0.3% lower.
CVS Health tumbled 19.1% after reporting weaker results for the latest
quarter than analysts expected. It said it's been hurt by increased costs at
its Medicare Advantage business, and it cut its forecast for profit over the
full year.
Other big names also dragged on the market following their profit reports,
including Starbucks, Advanced Micro Devices and Super Micro Computer. But the
focus is on Washington, D.C., where the Federal Reserve will announce its
latest move on interest rates in the afternoon.
No one expects the Fed to make any change to its main interest rate, which
is sitting at its highest level since 2001 in hopes of grinding down on the
economy enough to get inflation under control. But Fed Chair Jerome Powell will
give a press conference after the rate announcement, and he could give some
guidance about the chances for a cut to rates later this year.
He recently hinted rates may stay high for a while as Fed officials wait for
more confirmation inflation is heading down toward their 2% target. That was a
disappointment for Wall Street, after the Fed earlier had indicated it was
penciling in three cuts to rates during 2024.
Traders had been even more optimistic after coming into the year forecasting
six or more cuts to rates. Now, many are betting on the possibility of just
one, if any, according to data from CME Group. A string of reports on inflation
this year that have come in stubbornly higher than forecast has dashed hopes
for multiple rate cuts.
Without the benefit of easing rates, which can goose the economy and
investment prices, companies will need to deliver better profits.
Starbucks dropped 15.5% after falling short of expectations for both profit
and revenue in the latest quarter. Sales trends weakened at its stores outside
the United States in particular, and it cut its full-year forecasts for profit
and revenue.
Super Micro Computer, which has been one of Wall Street's hottest stars,
gave back 15.9% despite topping expectations for profit. The company, which
sells server and storage systems used in AI and other computing, fell shy of
analysts' forecasts for revenue. Expectations had bult up after its stock had
already tripled this year amid a broader frenzy on Wall Street around
artificial-intelligence technology.
Advanced Micro Devices dropped 7.4% despite reporting profit that matched
expectations. Its revenue came in a bit shy of forecasts, as did the midpoint
of its forecasted range for revenue in the current quarter.
They helped to offset a 2.3% gain for Amazon, which reported stronger profit
for the latest quarter than analysts expected. The retail behemoth credited
reaccelerating growth at its cloud-computing business, in part, as it benefits
from demand for AI.
Chemical producer DuPont was another winner, up 7.2%, after reporting
stronger profit than expected. It said demand from customers in the
semiconductor industry continued to recover.
In the bond market, Treasury yields eased a bit following some
weaker-than-expected reports on the economy.
One report from the Institute for Supply Management said the U.S.
manufacturing sector unexpectedly fell back into contraction last month.
Economists had been looking for one of the hardest-hit areas of the economy to
stay steady. Perhaps more concerningly, manufacturers also reported prices were
rising at a faster rate.
A separate report said U.S. employers were advertising slightly fewer jobs
at the end of March than economists expected. The hope on Wall Street has been
that a cooldown in the number of openings could help keep the job market in
check, not allowing it to get so hot that it adds upward pressure on workers'
wages and inflation overall. The downside is that if it weakens too much, a
major support for the economy could give out.
The yield on the 10-year Treasury slipped to 4.64% from 4.68% late Wednesday.
The two-year Treasury yield, which more closely tracks expectations for the
Fed, eased to 5.00% from 5.04%. It's still near its highest level since
November.
In stock markets abroad, many exchanges were shut for holidays. Tokyo's
Nikkei 225 slipped 0.3%, and London's FTSE 100 was down 0.1%.
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