Key points:

  • The S&P 500 and Nasdaq rose 0.11% and 0.23%, respectively.
  • The rise is limited by Powell’s announcement that no rate cuts are on the cards.
  • A rate reduction is possible in the 4th quarter of 2024.

The S&P 500 and Nasdaq posted gains on Wednesday, driven by a slowdown in the US services industry in March, according to published data. However, the stock market’s gains were limited by Fed Chairman Jerome Powell’s announcement that interest rates were not expected to cut anytime soon.

The Dow Jones Industrial Average fell 43.1 points, or 0.11%, to 39,127.14. The S&P 500 rose 5.68 points, or 0.11%, to 5,211.49. The Nasdaq Composite Index rose 37.01 points, or 0.23%, to 16,277.46.

Why is the Fed cautious in its decisions?

The US Federal Reserve will be cautious about cutting interest rates given the continued strength of the US economy and recent higher-than-expected inflation data.

On Wednesday, the Institute for Supply Management (ISM) released data showing that the non-manufacturing purchasing index (PMI) fell for the second month in a row, reaching 51.4 in March from 52.6 in February. This value was below analysts’ expectations. While a PMI reading above 50 indicates growth in the services sector, which makes up more than two-thirds of the U.S. economy, the pace of that growth appears to be slowing.

It was previously assumed that the Fed would begin cutting rates in June, but in light of positive economic data, many market participants doubted the advisability of such a rush.

Atlanta Fed President Raphael Bostic said rate cuts likely won’t be feasible until the fourth quarter of 2024.

Intel reported losses

Among the major sectors of the S&P 500 index, growth was predominantly observed, led by the energy, materials and telecommunications sectors.

However, Ulta Beauty shares were the biggest loser, losing 15.3% of their value. This happened after the company’s management voiced a pessimistic forecast at an industry conference. The decline also affected shares of e.l.f. Beauty and Coty.

Separately, it is worth noting the drop in Intel shares by 8.2%. This happened after the publication of the company’s report, which reported operating losses of the foundry business in 2023 in the amount of $7 billion. This figure exceeded last year’s result by $1.8 billion.

Trading volume on US exchanges totaled 11.03 billion shares, slightly below the average for the last 20 trading days (11.76 billion).