Stock market today: Wall Street drifts as it waits to hear from the Federal Reserve on rates

NEW YORK — Stocks are drifting as Wall Street waits to hear from the Federal Reserve about where interest rates may be heading. The S&P 500 slipped 0.2% early Wednesday, coming off its first losing month in the last six. The Dow Jones Industrial Average rose 109 points, and the Nasdaq composite fell 0.3%. CVS Health, Starbucks, Advanced Micro Devices and Super Micro Computer tumbled following their profit reports. The main focus is on the Fed, which is expected to keep its main interest rate steady. Chair Jerome Powell could give guidance about the chances for a cut to rates later this year.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.

U.S. markets are on track to continue their recent slide on Wednesday after closing out their worst month since September. All eyes will be on the Federal Reserve Wednesday, but few expect the U.S. central bank to make any change to its main lending rate, which is at its highest level in more than two decades.

Futures for the S&P 500 fell 0.4% before the bell, while futures for the Dow Jones Industrial Average lost 0.2%.

Most analysts think the Federal Reserve will leave its main interest rate alone when it closes its latest policy meeting Wednesday, however there is plenty of anxiety about what Chair Jerome Powell may signal about possible rate cuts later this year.

Powell has acknowledged that recent data showing still-elevated prices has undercut Fed officials’ confidence that inflation was steadily heading back to their 2% target, thereby making rate cuts anytime soon less likely.

The Fed’s preferred gauge of inflation reached a 4.4% annual rate in the first quarter of 2024, up from 1.6% in the last three months of 2023, and well above the Fed’s goal. At the same time, by most measures the economy is healthy and the labor market is thriving.

That combination — elevated inflation and a strong economy — has most traders betting that there will be at most two rate cuts this year. At the beginning of 2024, many were betting on six rate cuts.

Higher rates also push bond yields up, which puts pressure on the stock market because investors seek safer places for their money.

Also, if interest rates remain high, companies will need to produce stronger profits for their stock prices to rise. So far this earnings season, the trend has been better than expected, though not enough to buoy markets.

CVS Health tumbled 12.1% before the bell Wednesday after the health care giant and retail pharmacy chain badly missed analysts’ first-quarter targets and slashed its full-year profit forecast.

Coffee chain Starbucks also skidded more than 12% after it lowered expectations for its full-year sales and profit after a disastrous quarter that saw a 2% decline in sales.

Technology hardware maker Super Micro Computer fell even further — 13% — after it missed Wall Street’s sales targets and lowered its profit margin guidance.

On the winning side early Wednesday was Amazon, which reported strong first-quarter numbers after the bell Tuesday. The online retail behemoth’s results were driven by growth in its cloud-computing unit and new advertising dollars from its Prime Video streaming service.

Food delivery app DoorDash reports after the bell Wednesday.

At midday in London, the FTSE 100 was flat in light trading. Germany’s DAX, France’s CAC 40 and other European markets were closed for the May Day, or Labor Day, holiday.

Tokyo’s Nikkei 225 index lost 0.3%, down to 38,274.05 after the country’s factory activity experienced a milder shrink in April, as the manufacturing purchasing managers’ index from au Jibun Bank rose to 49.6 in April from 48.2 in March. A PMI reading under 50 represents a contraction, and a reading of 50 indicates no change.

The yen continues to struggle. On Wednesday, the U.S. dollar rose to 157.87 Japanese yen from 157.74 yen.

Australia’s S&P/ASX 200 dipped 1.2% to 7,569.90. Other markets were closed due to the Labor Day holiday.

Benchmark U.S. crude fell $1.45 to $80.48 a barrel. Brent crude, the international standard, lost $1.35 to $84.98 a barrel.

In currency trading, the euro cost $1.0675, up from $1.0663.

On Tuesday, the S&P 500 tumbled 1.6% to cement its first losing month in the last six, and ended at 5,035.69. The Dow Jones Industrial Average dropped 1.5% to 37,815.92, and the Nasdaq composite lost 2% to 15,657.82.

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