US close: Stocks deliver mixed performance following Fed decision

(Sharecast News) - Major indices delivered a mixed performance on Wednesday as market participants digested the Federal Reserve's latest interest rate decision.

At the close, the Dow Jones Industrial Average was down 0.38% at 44,461.28, while the S&P 500 shed 0.12% to 6,362.90, and the Nasdaq Composite saw out the session 0.15% firmer at 21,129.67.

The Dow closed 171.71 points lower on Wednesday, extending losses recorded in the previous session as investors digested a mixed bag of quarterly earnings reports from a number of America's biggest firms.

The Federal Reserve voted to hold its benchmark overnight interest rate steady at an effective rate of 4.3%, even as Fed governors Michelle Bowman and Christopher Waller dissented. Chairman Jerome Powell indicated that the central bank wasn't ready to cut interest rates just yet, despite pressure from the president, as the Fed head seemingly wanted to take a little longer to assess the full impact of Donald Trump's higher tariffs on US inflation.

Traders also parsed Powell's comments at a press conference for insights into the central bank's next move, with the chairman saying that the Fed had "made no decisions" about a potential policy shift come September.

"Our obligation is to keep longer-term inflation expectations well anchored and to prevent a one-time increase in the price level from becoming an ongoing inflation problem," said Powell. "Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen."

Corporate earnings also drew an amount of attention after the close on Wednesday, with Meta Platforms crushing Q2 earnings expectations despite heightened AI investment, while Microsoft quarterly profits soared by nearly a quarter on the back of improved cloud computing revenues, automaker Ford also posted a Q2 earnings beat but took a $800m hit from tariffs, and Robinhood reported a record quarterly performance as crypto revenues almost doubled.

On the macro front, US mortgage applications decreased in the week ended 25 July, according to the Mortgage Bankers Association of America, extending the prior week's 10% dive, as mortgage applications registered a 3.8% decline despite a drop in benchmark mortgage rates. Applications to refinance a mortgage, which are more sensitive to short-term changes in interest rates, fell by 1% week-on-week to their lowest since May, while applications to purchase a home declined a sharper 6%.

Elsewhere, private sector employment in the US rose more than expected in July, according to figures released on Wednesday by ADP. Employment rose by 140,000 from June, versus expectations for a 78,000 increase. Meanwhile, the June figure was revised to show that 23,000 jobs were shed, rather than 33,000.

On another note, the United States economy expanded significantly more than expected in the second quarter, according to preliminary estimates from the Bureau of Economic Analysis on Wednesday, bouncing back after the first annualised decline in GDP in three years. US GDP increased at a seasonally adjusted annual rate of 3.0% during the April to June period, well ahead of the 2.5% expansion expected by economists. That followed a 0.5% economic contraction in the first quarter after a historic jump in imports - as companies front-loaded purchases ahead of the launch of Donald Trump's trade war in April - weighed heavily on output figures. This was the first annual drop in GDP since the first quarter of 2022.

Finally, US pending home sales decreased in June, according to the National Association of Realtors, missing estimates of a 0.3% increase. Based on signed contracts, pending home sales dropped 0.80% month-on-month in June, taking a bite out of May's 1.8% increase. On an annualised basis, pending home sales decreased 2.8%.

Reporting by Iain Gilbert at Sharecast.com