US stocks close lower as traders scale back rate-cut bets
Stocks closed mostly lower after investors pared their expectations of Federal Reserve rate cuts for 2025.
The broad S&P 500 lost 7.94 points, 0.1%, to close at 6,362.92, while the Dow Jones Industrial Average fell 171.71 points, 0.4%, to close at 44,461.28. The tech-laden Nasdaq Composite index added 31.38 44 points, 0.2%, to finish at 21,129.67. All three indexes were off earlier lows.
While few experts had expected the central bank to lower rates in July, many correctly believed the post-announcement press conference would provide more clues about the possible path for rates throughout the remainder of the year.
The CME FedWatch tool which tracks investors bets on when the Fed will change the Federal target rate showed that traders moved their expectations for the first cut to October, from September, after Fed Chair Jerome Powell took reporters' questions.
"For Federal Reserve Chair Jerome Powell and the majority of the committee, the weakness in the economy is outweighed by the uncertainty and upside risks to inflation. The August 1 tariff threats and the passing of the tax and spending bill earlier this month will have heightened those fears," said Michael Pearce, deputy chief US economist at Oxford Economics, in a statement out after the meeting. "We think the uncertainty and balance of risks will push the majority of the committee to remain in wait-and-see mode at least a few months longer, with the next rate cut not coming until December."
The 10-year US Treasury note gained nearly 5 basis points to trade near 4.38% in the afternoon.
Ongoing trade deal talks
U.S. and Chinese officials continue to hold trade talks in Stockholm, Sweden, as an agreement to extend a tariff truce that expires on Aug. 12 remains elusive. Chinese trade negotiator Li Chenggang told reporters that both sides agreed on maintaining the truce, but Treasury Secretary Scott Bessent said that was jumping the gun. Any extension would have to be approved by President Donald Trump, he said.
Meanwhile, South Korean officials met with U.S. Commerce Secretary Howard Lutnick in Washington to try to prevent an increase in tariffs on Korean exports before an Aug. 1 deadline.
Economic news
U.S. GDP expanded at a 3% annual pace in the second quarter, the government said Wednesday morning, more than economists had forecast. Most experts believe that readings on the economy will be skewed by the effects of the White House's tariff announcements.
Private employers hired 104,000 workers in June, payroll processor ADP said Wednesday, also topping consensus estimates.
Earnings and company news
Investors also will be looking at key earnings reports for direction. More so-called Magnificent Seven influential megacap technology stocks are slated to report this week. They include Facebook-parent Meta Platforms and software giant Microsoft after the market closes Wednesday. Investors will want to see if artificial intelligence spending remains intact. AI spending has fueled the rally in many tech stocks this year.
Other companies due to report after the close include Robinhood, Qualcomm, Arm Holdings, Lam Research, Carvana and Allstate.
- Shares of Novo Nordisk, maker of weight-loss drugs Wegovy and Ozempic, fell more than 7% on Wednesday after losing more than 20% Tuesday when the company warned on full-year sales growth.
- Starbucks reported a decline in US same-store sales after the bell on Tuesday, but the decline was not as bad as Wall Street expected. Shares closed 1.3% lower.
- Kraft Heinz shares ticked lower after the company announced a loss in its most recent quarter. Sales were higher than analysts had forecast, however.
American Eagle controversy
Shares of American Eagle Outfitters closed 2.3% lower after soaring earlier following an online backlash to actress Sydney Sweeney's commercial for the company's jeans. Some audiences felt the ad was in bad taste, with Sweeney's dialogue drawing allusions to eugenics.
(This story was updated with new information.)