Dow Sees Worst Day In Over A Year, Nasdaq Enters Correction Territory As Fed Decision Piques Inflation Concerns — SPCX, CAT, ADBE, SOFI, HIMS Stock In Focus

• The S&P 500 ended 1.5% lower, while the Nasdaq 100 slipped 2.1% and the Dow Jones Industrial Average lost 2.2%.
• Microsoft and Meta released their quarterly earnings after-hours. Microsoft beat overall expectations, while Meta lagged. 
• The Federal Reserve chose to keep interest rates unchanged. 

U.S. stock indices ended Wednesday lower, with the Nasdaq entering correction territory after the Federal Reserve chose to leave benchmark rates unchanged for the fifth consecutive time, raising concerns of inflation running ahead of the curve. 

The S&P 500 ended 1.5% lower, while the Nasdaq 100 slipped 2.1% and the Dow Jones Industrial Average lost 2.2%. The Russell 2000, which tracks stocks with small market capitalizations, dropped 1.7%.

However, U.S. stock futures were little changed on Wednesday. Futures tied to the Dow Jones Industrial Average rose 120 points, or 0.2%, while S&P 500 futures and Nasdaq 100 futures gained about 0.1% as investors digested the latest round of Big Tech earnings. Microsoft, Meta Platforms and Qualcomm reported quarterly results after the closing bell.

Among ETFs tracking benchmark indexes, the SPDR S&P 500 ETF (SPY) dropped 1.2%, and Invesco QQQ Trust (QQQ) ended Wednesday 1.6% lower, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 1.9%.

Meanwhile, the VanEck Semiconductor ETF (SMH) fell 5%, down for the fifth straight session, pulled down by weakness in AMD (AMD), Broadcom (AVGO) and Micron Tech (MU). The broader Vanguard Information Technology ETF (VGT) fell 1.1%, tracking weakness in Tesla (TSLA), Amazon (AMZN) and SpaceX (SPCX).

Retail sentiment on Stocktwits for QQQ dropped to the ‘extremely bearish’ zone, while sentiment for SPY was ‘bearish’ and ‘neutral’ for the DIA with ‘high’ message volumes.

US Market Drivers

The U.S. Federal Reserve left interest rates unchanged in Kevin Warsh’s second decision as the Fed chair on the back of elevated inflation and a strong job market. The Federal Open Market Committee approved the following statement for release by a 9 – 3 vote.

 The choice to maintain rates represented the fifth consecutive pause by officials. This move comes as the Fed pivots its attention toward inflation due to energy price fluctuations resulting from the conflict in Iran, while the job market remains resilient.

Warsh, in his press briefing, highlighted his intention to keep inflation under control, with a strict 2% target, but that did little to calm bond markets. The 10-year Treasury yield jumped 7 basis points to above 4.67%. The 30-year Treasury yield soared 10 basis points to above 5.2%, hitting its highest level since 2007. 

Meanwhile, the drop in chipmaker stocks continued. The Philadelphia Semiconductor Index (SOX) dropped another 5% while heading to its worst month since 2002 as investors continue to rotate out of chipmaker stocks over rising concerns about the sustainability of the AI boom. 

“Parsimony, uncertainty, and volatility are the points put forward by Warsh as he attempts to change the Fed’s policy regime,” RSM Chief Economist Joseph Brusuelas wrote in a note, accessed by Bloomberg. Sparse statements “will not be well received by the public outside a small section of institutional investors,” he said. 

Trending Stocks To Watch 

SpaceX (SPCX): Starlink operator SpaceX (SPCX) is seeking wireless spectrum for urban and densely populated areas. The report raised concerns that the Elon Musk-led company could compete directly with the major U.S. carriers. 

Caterpillar (CAT): Baird Equity Research downgraded the stock, citing growing regulatory and public backlash against data center construction. 

Adobe (ADBE): Federal regulators have cleared a key regulatory hurdle for the Photoshop maker, allowing the software giant to move forward with its acquisition of AI technology company Topaz Labs. 

SoFI Technologies (SOFI):  The firm raised its full-year revenue guidance, with CEO Anthony Noto stating that the second quarter is an inflection point. 

Hims & Hers (HIMS): The U.S. Federal Trade Commission sued the telehealth company over allegations it shared sensitive user health data with advertisers, including Meta Platforms and Snap, while also engaging in deceptive billing and cancellation practices. 

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