NEW YORK — U.S. stock indexes slipped Wednesday after the Federal Reserve opted not to cut interest rates for the first time since it began trying to help the economy through easier rates in September.
The Standard and Poor’s 500 fell 0.5% following the Fed’s widely expected decision. The Dow Jones industrial average dipped 137 points, or 0.3%, and the Nasdaq composite fell 0.5%.
The reaction was also relatively muted in the bond market following the Fed’s decision, which could hint at rates staying on hold for a while following their swift drop at the end of 2024. Lower rates would help the economy by making it cheaper for U.S. households and companies to borrow, but the downside is they could also give inflation more fuel.
Fed Chair Jerome Powell said after the decision that the central bank could cut rates if inflation were to slow further or if the job market suddenly weakened. But “right now, we don’t see that, and we see things as in a really good place for policy and for the economy, and so we feel like we don’t need to be in a hurry to make any adjustments.”
Although Wall Street would almost always prefer lower interest rates, “we would continue to focus on why the Fed won’t cut any time soon, specifically a strong economy and labor, which bodes well for solid corporate earnings growth,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute.
Wednesday’s relatively calm movements for financial markets offered some respite following two days of disruption driven by doubts about the artificial-intelligence boom.
A Chinese upstart, DeepSeek, has raised nearly existential questions for some of the AI industry after saying it developed a large-language model that can compete with the world’s best without having to use top-flight chips.
That casts doubt about whether AI development broadly will require as much spending on chips, vast data centers and electricity as Wall Street and Big Tech had been assuming. That in turn has caused huge swings for stocks across the industry, particularly for Nvidia.
The company, whose stock has almost become a symbol of the AI bonanza, fell 4% Wednesday after plunging nearly 17% Monday and then jumping nearly 9% Tuesday. It was the single heaviest weight dragging the S&P 500 lower, by far.
Big gains for Nvidia and other Big Tech companies had been instrumental in the S&P 500’s rallying to consecutive yearly gains of more than 20% for the first time since before the millennium. Nvidia alone accounted for more than a fifth of all of the S&P 500’s total return last year.
Elsewhere on Wall Street, Starbucks rose 8.1% after delivering a better profit for the latest quarter than analysts expected. Chief Executive Brian Niccol said the chain is planning to cut its food and beverage offerings by 30% over the course of this year to simplify operations and speed service, part of its efforts to turn the company around.
T-Mobile US rallied 6.3% after topping Wall Street’s expectations for both profit and revenue in the last three months of 2024. It also said it expects to add between a net 5.5 million and 6 million in postpaid customers this year.
Brinker International jumped 16.3% after the company behind Chili’s restaurants delivered better results than expected. CEO Kevin Hochman said Chili’s attracted new customers and that its return customers were coming more frequently.
Railroad operator Norfolk Southern rose 1.8% after beating Wall Street’s profit forecasts. There is also growing optimism that a Republican-controlled Congress could ease restrictions on the industry.
Frontier Group Holdings climbed 5.3% after announcing it would try for a second time to merge with Spirit Airlines, which sought bankruptcy protection late last year. Frontier said the proposed deal would include newly issued Frontier debt and common stock.
Trump Media & Technology Group rose after announcing it would be getting into the financial services business via a partnership with Charles Schwab. TMTG said more details would be released later this year, and what had been a double-digit gain for the notoriously volatile stock shrank to an increase of 6.8%.
On the losing end of Wall Street was Danaher, which fell 9.7% after the life sciences, biotechnology and diagnostics company reported results for the latest quarter that just missed analysts’ expectations.
All told, the S&P 500 fell 28.39 points to 6,039.31. The Dow Jones industrial average dipped 136.83 to 44,713.52, and the Nasdaq composite sank 101.26 to 19,632.32.
In the bond market, the yield on the 10-year Treasury held at 4.53%, where it was late Tuesday.
In stock markets abroad, indexes were mixed in Europe. ASML’s stock jumped 5.6% in Amsterdam after announcing strong revenue on demand for its advanced chipmaking tools.
In Asia, where many markets were closed for holidays, Japan’s Nikkei 225 rose 1%.
Choe writes for the Associated Press. AP Writers Matt Ott and Zimo Zhong contributed.