Stocks Drop as Investors Prepare for Fed Decision

Earnings reports, jobs report also due this week
By Newser Editors and Wire Services
Posted Jan 30, 2023 3:56 PM CST
Wall Street Falls Ahead of a Big Week
Traders work on the floor at the New York Stock Exchange.   (AP Photo/Seth Wenig, File)

Stocks closed lower on Wall Street ahead of a week full of potentially market-moving events. The S&P 500 fell 52.79 points, or 1.3%, to 4,017.77 Monday as markets prepared for decisions on interest rates around the world and a slew of earnings reports. The Dow Jones Industrial Average fell 260.99 points, or 0.8%, to 33,717.09. The Nasdaq composite fell 227.90 points, or 2%, to 11,393.81. Markets have been veering recently on worries that the economy and corporate profits may be set for a steep drop-off, along with competing hopes that cooling inflation will get the Federal Reserve to take it easier on interest rates, the AP reports.

The central bank’s next decision on rates is coming Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. That would be the smallest increase since March, following a spate of hikes of 0.75 points and then a 0.50-point increase, and it would mean less added pressure on the economy. The big question is whether Fed Chair Jerome Powell on Wednesday afternoon will give markets what they want to hear—hints that rate hikes will end soon and rate cuts may even be possible late this year—or stick to the Fed’s mantra that it plans to keep rates higher for longer, even if a modest recession hits.

More than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon, and Alphabet, Google’s parent company. Because these companies are three of the four biggest on Wall Street by market value, their stock movements carry much more sway on the S&P 500 than others. Apple's 2% drop Monday, for example, was one of the heaviest weights on the S&P 500. The only other stock that rivals them in size, Microsoft, shook Wall Street last week when it gave forecasts for upcoming results that raised worries about a slowdown in corporate spending on tech. Its stock fell 2.2% Monday.

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Companies generally look to be on track to report slightly weaker profit for the end of 2022 than expected, according to a BofA Global Research report. Later this week, the US government will also give its latest monthly update on the job market. Some big tech companies have announced high-profile layoffs after acknowledging they misread their boom coming out of the pandemic. But job cuts may be starting to spread to other areas of the economy. Hasbro and 3M last week announced layoffs. Economists expect Friday’s report to show that US employers added 187,500 more jobs than they cut during January. That would be a slowdown from December’s hiring of 223,000. (More stock market stories.)

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