S&P 500 index
The Fed didn’t touch rates Wednesday. And stocks still didn’t like it.
Why it matters: The share slide suggests that year’s market rally may be based in part on unrealistic expectations that the Fed will quickly flip toward cutting rates if the economy continues to look like it could pull off a soft landing.
State of play: As expected, on Wednesday at 2pm ET, the Fed announced it was leaving its policy rate in place at 5.25%-5.5%.
But the market started to go downhill once Fed chair Jerome Powell got behind the podium for the post-announcement news conference at 2:30.
The S&P 500 ended the day down 0.9%. The interest rate-sensitive Nasdaq dropped 1.5%.
Zoom in: Powell maintained a pretty effective poker face through much of the meeting, fending off efforts to pin him down on what the Fed would do next.
Yes, but: Seasoned observers noted that, with inflation still high, he didn’t sound especially eager to explore the idea of cutting rates.
“We’re prepared to raise rates further if appropriate and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably,” Powell said, in one of the comments that market analysts focused on.
The bottom line: Wednesday seemed to convince more investors there’s little sign of rate cuts any time soon.