US stocks fall after Fed meeting as tech earnings fail to wow investors

Wall Street stocks tumbled Wednesday following earnings from tech giants that failed to wow investors as the Federal Reserve signaled that more time was needed to cut interest rates.

Fed Chairman Jerome Powell said the central bank was unlikely to lower interest rates in March. He pointed to progress in the battle to cool inflation to its two percent target, while saying more improvement was needed.

"We believe that our policy rate is likely at its peak for this tightening cycle," Powell told reporters at a press conference after the rate decision.

He added that "almost everyone" on the Fed's rate-setting committee was in favor of a cut in 2024, but that a move as soon as the next meeting in March was unlikely.

All three major indices retreated with the broad-based S&P 500 losing 1.6 percent.

The Fed's communication was "less dovish than expected, suggesting that the interest rate cutting cycle may start later than many traders were anticipating," said a note from Matt Weller of Forex.com.

The Fed announcement came ahead of Friday's closely watched government jobs report.

Payroll firm ADP estimated the US private sector added 107,000 jobs in January, fewer than expected.

While all 11 sectors of the S&P 500 finished in the red, tech shares were especially weak despite solid earnings from Microsoft and Google parent Alphabet. The results were not strong enough to extend a months-long sector rally over artificial intelligence.

Alphabet shares closed 7.4 percent down while Microsoft lost 2.7 percent.

"There is a sense in the market that the Microsoft and Google earnings failed to live up to the high expectations around AI," said Kathleen Brooks, research director at XTB.

"Although Microsoft saw earnings and profits rise, its forward guidance was not particularly well received."

Apple, Amazon and Facebook owner Meta, are due to report later this week.

London was up and Paris flat in early trading but both closed lower as they followed trading in New York.

While recent inflation and growth data in Europe points towards the European Central Bank unwinding its own rate increases, investors are largely cautious after recent warnings from ECB officials that they are in no rush to cut.