Wall Street Woes: US Stocks Plummet as Rate-Cut Dreams Evaporate

Published on: Feb 01, 2024|3 min read

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London: 1 February 2024 (TraderMade): The confluence of a more hawkish Fed stance, disappointing earnings reports, and sectoral concerns triggered a significant market sell-off, marking the worst day for stocks since September 2023.

With crucial labor market data looming on Friday, investors remain cautious and await further clarity on the Fed's monetary policy trajectory.

US Stocks Plummet: Key Takeaways

Worst Day Since September: US stocks suffered their heaviest losses since September 2023 due to dashed rate cut hopes.
Fed Shifts Hawkish: The Fed's policy statement and Chairman Powell's remarks indicated a more cautious stance on future rate cuts, dampening market expectations.
Tech Troubles: Alphabet and Microsoft disappointed with weaker-than-expected earnings, adding to the sell-off.
Financial Concerns: AMD's weak guidance and NYCB's dividend cut reignited worries about the financial sector.
All Eyes on Friday: Investors await the crucial labor market report for clues on the Fed's next move.

Fed Statement Shifts Sentiment

The Fed's recent statement and Chairman Powell's remarks caused a significant pessimistic reaction in equity markets. Despite the expected decision to maintain interest rates, eliminating openness to future tightening and emphasis on sustained inflation control dashed hopes for an imminent rate cut. This shift toward a more hawkish stance led to a notable sell-off and soured market sentiment, extinguishing expectations for near-term easing.

Powell Dampens Optimism

Chairman Powell's press conference further cooled rate cut expectations, stating the Fed is unlikely to have sufficient confidence for a March cut. His data-dependent stance offered little solace, leaving investors apprehensive.

Further dampening optimism, Chairman Powell explicitly stated during his press conference that he did not anticipate the Fed attaining the necessary level of confidence to reduce rates by the March meeting. While he reiterated data dependence for future decisions, his comments cemented the market's revised outlook.

Tech Titans Disappoint

Popular technology companies' inferior earnings reports added to the market's woes. Alphabet (Google) disappointed investors with weaker-than-expected ad revenues (despite achieving solid overall Q4 results). Similarly, Microsoft lacked an in-line revenue outlook (Microsoft). This added pressure to the sell-off, reflecting broader concerns about the tech sector.

Alphabet (GOOGL) plummeted 8.86% to 140.005 at about 12:02 PM GMT today, compared to its 30 January High of 153.61999.

Similarly, Apple (AAPL) declined 3.94% in the last 2 days to 184.63.

Financial Jitters Resurface

Concerns resurfaced in the financial sector, with Advanced Micro Devices' weak Q1 guidance and New York Community Bancorp's surprising dividend cut contributing to the downward pressure.