US stocks were mixed on Wednesday afternoon after the Federal Reserve announced its latest rate hike, a move that pushed the Fed’s key interest rate to its highest level since October 2007.
In its statement, the Fed noted inflationary pressures but said inflation “remains elevated” as price pressures appear to be persistent across the economy.
The central bank also suggested that Wednesday’s rate hike would not mark the end of its campaign, saying the Fed “expects that ongoing increases in the target range will be appropriate to achieve a monetary policy stance that is sufficient restrictive to bring inflation back to 2 percent over time.
The statement added that futures hikes “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
After the Fed announced a 0.25% interest rate hike, its smallest increase in nearly a year, the S&P 500 (^GSPC) fell 0.2%, while the Dow Jones Industrial Average (^DJI) sank 0 .7%. The tech-heavy Nasdaq Composite (^IXIC) turned in the green, rising 0.2%.
Stocks had a strong start to the year on Tuesday, with the S&P 500 posting its best January since 2019, while the Nasdaq 100 enjoyed its strongest January rally since 2001, gaining more than 10%.
Earnings season also remains in full force, with another disappointing quarter from Snap ( SNAP ) coming out last night and garnering the most attention from investors.
Shares of the social media company fell more than 14% after the company told investors that its internal forecasts suggested that revenue in the current quarter would fall between 10% and 2% from a year earlier.
Shares of Match Group ( MTCH ) and Electronic Arts ( EA ) were also down more than 9% and 12%, respectively, on Wednesday after reporting disappointing quarters on Tuesday afternoon.
Shares of Peloton ( PTON ) rose more than 17% on Wednesday after the company reported that its cash flow fell to $94 million in the latest quarter, down from $747 million nine months ago. On an adjusted basis, the company reported $8 million in free cash flow during the holiday quarter.
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“If you’ve been wondering if Peloton could make an epic comeback, this quarter’s results show that the changes we’re making are working,” CEO Barry McCarthy wrote in a letter to shareholders.
Wednesday’s earnings highlight will come after the market closes when Meta Platforms ( META ) releases its quarterly report.
On the economic front, new data on private payrolls growth from ADP showed that private employers added 106,000 jobs last month, less than the 170,000 economists had expected.
In its report, ADP said the weather affected the measurement of the labor market, citing flooding in California and snowstorms in the central and eastern parts of the country during the reporting week.
“In January, we saw the impact of weather-related disruptions on employment in our reference week. Hiring was stronger in the other weeks of the month, consistent with the strength we saw late last year,” said ADP Chief Economist Nella Richardson.
December job vacancies data released on Wednesday suggested that demand for workers remained steady, with 11 million jobs available at the end of the month, up from 10.4 million at the end of November.
Elsewhere in the economic data, readings on the manufacturing sector from S&P Global and the Institute for Supply Management showed that activity remained subdued in the first month of 2023.
The latest ISM manufacturing PMI reading fell to its lowest level since May 2020, which economists saw as another sign that recessionary pressures continue to build in the US economy.
Writing in a note to clients on Wednesday, Andrew Hunter, senior US economist at Capital Economics, wrote that a closer look at the ISM report suggested that “domestic economic weakness is increasingly the main driver of the woes of the manufacturing sector and more broadly The ISM report reinforces our view that the US economy is close to a recession.”
The S&P Global report showed that manufacturing activity deteriorated at a slightly slower pace in January than in December, but still showed a “worryingly sharp decline in the health of the goods-producing sector,” according to Chris Williamson, chief business economist at S&P Global Market Intelligence.
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