Fed rate decision, stock market updates: Dow, Nasdaq, S&P 500 slip, Nvidia falls as Fed leaves rates unchanged

Updated Wed, Jan 29, 2025, 5:01 PM 1 min read

Tesla (TSLA) reported quarterly results that largely fell short of Wall Street’s expectations, but shares were higher by about 3% after hours. Meanwhile, Meta (META) and Microsoft (MSFT) both saw their stocks move lower after reporting results. Meta’s sales guidance for the current quarter fell short of expectations, weighing on shares, while Microsoft’s cloud revenue missed estimates.

LIVE COVERAGE IS OVER 25 updates

Meta shares slip after spending than expected in 2025, weaker sales forecast for first quarter

Meta (META) stock fell about 5% in after-hours trading after its first quarter sales forecast came in lower than expected and the company said it plans to spend more on capital expenditures in 2025 than initially thought.

Meta’s expects revenue in the first quarter to be in a range of $39.5 billion to $41.8 billion. Analysts had expected first quarter revenue of $41.67 billion. Meanwhile, the company is continuing to boost its capital expenditures spending. Meta said it plans to spend $60 to $65 billion on CapEx in 2025, above Wall Street’s estimate for $52.41 billion.

Read more from Yahoo Finance’s Dan Howley.
IBM stock pops 5% after free cash flow forecast surprises, AI bookings increase

Shares of IBM (IBM) were up more than 11% in after-hours trading after the company’s full-year revenue forecast came in above estimates amid an increase in AI bookings.

IBM projected constant currency revenue to grow 5% in the full year, above estimates for 4.81% growth. Meanwhile, the company forecasted free cash flow of $13.5 billion for the full year, above the $12.92 billion Wall Street had expected. IBM also said its generative AI book business now stands at more than $5 billion.
Tesla stock seesaws after earnings, gross margin miss

Tesla (TSLA) stock fell as much as 6%, before reversing course and rising 3%, in after-hours trading as the company missed Wall Street’s estimates for fourth quarter earnings per share and fell short on several other key metrics.

The electric vehicle maker reported adjusted earnings per share of $0.73 in the fourth quarter, below the $0.75 Wall Street had expected. Meanwhile, Tesla’s closely watched gross margins also disappointed. Tesla reported gross margins of 16.3% in the fourth quarter, below the 18.9% analysts had expected. Tesla’s operating income came in at $1.58 billion, missing estimates of $2.68 billion.

Read more from Yahoo Finance’s Pras Subramanian.
Microsoft stock falls after cloud business misses revenue expectations

Microsoft (MSFT) reported Q2 earnings on Wednesday that beat expectations on both the top and bottom lines. But revenue for its intelligent cloud business, which includes its popular Azure platform, came in short of estimates, sending the stock down as much as 5.5% in after-hours trading.

The company reported cloud revenue of $40.9 billion in the quarter, falling short of the $41.4 billion Wall Street analysts had expected. Investors have been banking on the segment to deliver amid a recent acceleration in AI spending as Monday’s DeepSeek tech sell-off remains top of mind.

“We are innovating across our tech stack and helping customers unlock the full ROI of AI to capture the massive opportunity ahead,” Satya Nadella, chairman and CEO of Microsoft, said in the earnings release.

He did signal positive developments in artificial intelligence efforts, writing, “Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year over year.”

Amy Hood, executive vice president and CFO of Microsoft, added the company remains “committed to balancing operational discipline with continued investments in our cloud and AI infrastructure.”

Read more here.
Powell on crypto: ‘We’re not against innovation’

Powell said the Fed’s role with crypto is to look at the banks — and noted it’s “not against innovation” as cryptocurrencies like bitcoin and other alternative tokens have taken a more prominent role under the Trump administration.

“Banks are perfectly able to serve crypto customers as long as they understand and can manage the risks,” he said. “It’s safe and sound. A good number of our banks that we regulate and supervise do that.”

The central bank leader did note that the “threshold has been a little higher for banks engaging in crypto activities” due to the “new” nature of digital currencies.

“If you’re making a choice to conduct that activity inside a bank, which is inside the federal safety net with deposit insurance, then you want to be pretty sure that it’s a safe and sound activity,” he said.

“So we’re not against innovation and we certainly don’t want to take actions that would cause banks to terminate customers who are perfectly legal just because of excess risk aversion that may be related to regulation and supervision.”
Powell shrugs off DeepSeek sell-off

Powell shrugged off Monday’s massive tech sell-off, spurred by Chinese startup DeepSeek and the ripple effect its potentially cheaper AI model could have on Big Tech.

“It’s a big event in the stock market and in particular parts of the stock market,” he told reporters. “[But] what really matters for us is macro developments. And that means substantial changes in financial conditions that are persistent for a period of time.”

The central bank leader said he “wouldn’t put that label” on Monday’s market action. Still he added, “Of course, we’re all watching it with interest.”
Powell says labor market appears to be settling at ‘stable level’

In this morning’s Yahoo Finance Morning Brief newsletter, we highlighted a chart from Dynamic Economic Strategy CEO John Silvia that showed the unemployment rate is hovering near where the Fed expects it to end this year, while private payroll growth has come off the boil.

Silvia argued in volume four of Yahoo Finance’s Chartbook that this dynamic likely gives the Fed little room to move rates much further in either direction.

On Wednesday, Fed Chair Jerome Powell specifically referenced this dynamic, saying it’s usually an indicator that the labor market is at a “sustainable level” and not “overheated anymore.”

“The labor market does seem to be pretty stable and broadly in balance, when you’ve got an unemployment rate that has been pretty stable now for a full half year,” Powell said.
Powell calls out moderating shelter inflation with a caveat

Powell cited moderating shelter inflation as “further progress” toward the Fed’s 2% goal, referencing the recent deceleration seen in owner’s equivalent rent and housing services. Those categories are calculated into the Personal Consumption Expenditures index, or PCE, which is the Fed’s preferred inflation measure.

“You see that coming down pretty steadily now,” Powell said. “And that’s the place where most of the remaining gap is.”

In December, the shelter index rose 4.6% on an unadjusted annual basis, slightly lower than November’s 4.7% uptick and the smallest 12-month increase since January 2022. Moderating shelter prices contributed to the first year-over-year core CPI price deceleration since July, with prices rising 3.2% on an annual basis.

Prior to December’s print, core CPI had been stuck at a 3.3% annual gain for the past four months.

Within shelter, the index for rent and owners’ equivalent rent (OER) each rose 0.3% from November to December. Owners’ equivalent rent is the hypothetical rent a homeowner would pay for the same property.

“You can look through all of that and think, okay, we seem to be set up for further progress,” he said. “But being set up for it is one thing. Having it is another. So we’re going to want to see further progress on inflation.”
Fed sees ‘elevated uncertainty’ in forecasts

As Fed Chair Jerome Powell caveated, economic forecasts are always uncertain. But this time feels a bit different with questions about President Trump’s policies swirling.

“In the current situation there’s probably some elevated uncertainty because of the significant policy shifts in those four areas that I mentioned, tariffs, immigration, fiscal policy, and regulatory policy,” Powell said. “So there’s probably some additional uncertainty. But that should be passing. We should go through that. And then we’ll be back to the regular amount of uncertainty.”

Economists however have been a bit more cautious about how the inflationary impact of tariffs could impact the Fed’s path forward.

“If the Fed doesn’t resume cutting in the next few months … we suspect the window will have closed,” Capital Economics North America economist Paul Ashworth wrote in a note on Wednesday. “While markets are still pricing in second half rate cuts, our view is that a flurry of tariffs will put a stop to that, as inflation rebounds to 3%.”
Powell calls changes to Fed statement ‘language cleanup’

The biggest initial development out of the Fed’s policy statement on Wednesday centered on a shift in the wording of the final sentence in the first paragraph of the Fed’s statement.

If that feels like a fine slice, it is.

On Wednesday, the Fed said regarding inflation: “Inflation remains somewhat elevated.”

In December, the central bank had said: “Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”

The removal of the phrase “made progress” was not received well by markets, with stocks moving to session lows shortly after the release of the statement.

The read here suggesting that this language change signaled a lack of confidence from the Fed that inflation will continue moving lower.

About 45 minutes later, Powell pushed back on that notion, referring to the change as “language cleanup” rather than intending to send a signal.

In response, stocks bounced off their lows.

Even before this question and answer, Wall Street economists were arguing along the lines of what Powell was laying out.

“Markets have overreacted to the small statement tweaks,” wrote Samuel Tombs, chief US economist at Pantheon Macroeconomics, in an email.

“Inflation is now simply described as remaining ‘somewhat elevated,’ where previously it was deemed to have ‘made progress towards the Committee’s 2 percent objective,’ but we doubt that reflects disappointment on the Committee about recent data. The December CPI and PPI data imply that the Q4 average of core PCE inflation will match the FOMC’s December forecast, 2.8%.”
Powell: ‘I’ve had no contact’ with President Trump

Last week, President Donald Trump said with oil prices falling, he’d “demand that interest rates drop immediately.”

When asked on Wednesday if the President has actually made that demand, Federal Reserve Chair Jerome Powell said, “I’ve had no contact [with the president].”

“I’m not going to have any response or comment whatsoever on what the president said,” Powell said. “It’s not appropriate for me to do so. The public should be confident that we will continue to do our work.”
Fed removes ‘progress’ on inflation from FOMC statement

The Federal Reserve held interest rates steady on Wednesday as widely expected, but removed one key phrase in its statement that could point to the central bank leaning more hawkish than it has been in prior meetings.

In December, the FOMC statement stated “Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.”

In the January release on Wednesday, the statement simply read, “Inflation remains somewhat elevated.”

Markets quickly moved on the wording shift, with traders now pricing in a nearly 60% the Fed holds interest rates steady through at least its May meeting, per the CME FedWatch tool. Just a day prior traders had priced in a 50/50 chance the Fed would cut rates at its May meetings.

All three of the major indexes moved lower following the release. The tech-heavy Nasdaq Composite (^IXIC) was down more than 1%, retracing some of a bounce-back rally on Tuesday. The S&P 500 (^GSPC) was down about 0.8%, while the Dow Jones Industrial Average (^DJI) lost 0.5%.
Federal Reserve keeps interest rates unchanged, as expected

The Federal Reserve on Wednesday kept interest rates unchanged in a range of 4.25%-4.5%, as expected.

In its statement, the central bank said, “economic activity has continued to expand at a solid pace.”

It added, “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”

There were no dissents among the 12 voters on the FOMC.
A wild card question for the Fed presser…

Fed Chair Jay Powell is set to take questions from the media at 2:30 p.m. ET.

And while the Fed is expected to hold rates steady, and Powell will get expected questions around how Trump’s policies — and the president’s jawboning on rates — could weigh on the Fed’s plans, I think there’s a wild card topic Powell could be asked about: chips.

Nvidia stock was falling Wednesday afternoon amid another report the Trump admin may look to curb sales of the company’s chips to China.

This follows the market panic over the capabilities of Chinese AI model DeepSeek, and the subsequent questions and accusations about where the company behind the LLM got their computing power, how they used competitor APIs, and so on.

Powell may decline to answer questions that are, in the end, about national security and industrial policy.

But we wouldn’t rule it out.
Nvidia extends losses after report of potential additional curbs on China sales

Nvidia (NVDA) stock hit its lows of the day after Bloomberg reported that Trump administration officials are “exploring additional curbs” on Nvidia’s chip sales to China.

The news comes amid a volatile week for Nvidia stock that saw the worst one-day market cap loss in history on Monday, with shares sliding nearly 17% as investors digested the growing popularity of a new cost-effective artificial intelligence model from the Chinese startup DeepSeek.
‘I prefer across the board’: Trump’s top tariff man favors broad duties for a range of issues — including AI

Yahoo Finance’s Ben Werschkul reports:

Donald Trump’s pick for commerce secretary underlined that broad, country-by-country tariffs can be used to address a host of economic issues, including the protection of America’s artificial intelligence lead.

“I prefer across the board” tariffs, Howard Lutnick told senators during his confirmation hearing Wednesday just days ahead of a key deadline that could see these types of blanket duties in place on Canada, Mexico, and China.

He also linked tariffs to a debate this week about AI export controls, which he would oversee if confirmed, saying that such controls without the backing of tariffs lead to “a whack-a-mole model.”

Read more here.
Tech leads losses headed into Fed meeting

About 90 minutes before the Federal Reserve’s next decision on interest rate is expected, the S&P 500 is down about 0.3%.

Information Technology led the losses in the benchmark index, falling more than 0.8.%, led by a more than 4% drop in Nvidia (NVDA).
Nvidia stock crash saw retail investors dump more than $900 million into the name

Nvidia (NVDA) stock tanked on Monday, falling more than 17% and losing nearly $600 billion off its market cap, as investors digested a new cost-effective artificial intelligence model from the Chinese startup DeepSeek.

But retail investors bought the dip. Data from VandaTrack shows retail investors bought more than $562 million of the name on Monday, the largest single-day inflow into the stock in VandaTrack’s data. On Tuesday, as the stock rebounded and rose roughly 9%, there was once again a large swath of retail buying totaling nearly $360 million. Across the two days of chaotic market action, retail investors sent more than $920 million into shares of Nvidia.

Wall Street strategists largely agreed with retail’s bullish outlook on the name.

“We think this is probably going to end up a buy-the-dip Nvidia moment,” Fundstrat head of Research Tom Lee said in a video to clients on Monday night.

Bernstein’s Stacy Rasgon told Yahoo Finance’s Seana Smith the DeepSeek-driven sell-off was “overblown.” Rasgon added that the new developments don’t spell out “doomsday for AI infrastructure.”
Starbucks CEO says a turnaround is underway, with no timeline on the table

Starbucks (SBUX) shares are up more than 5% after reporting quarterly results.

Yahoo Finance’s Brian Sozzi reports:

Starbucks CEO Brian Niccol is promising more caffeinated growth but isn’t yet ready to put hard projections around when.

And for now, that continues to be enough for Wall Street.

On its earnings call, the company highlighted improved sequential sales trends in the US as it worked to speed up mobile orders and end upcharging for dairy substitutes, among other changes.

“I think we’re definitely in the middle of a turnaround,” Niccol said on Yahoo Finance.

Read more here.
Nvidia slides nearly 4% as comeback falters

It’s been a whipsaw week of trading action for AI leader Nvidia (NVDA).

The stock lost a record $589 billion in market cap on Monday, with shares falling roughly 17% as a new artificial intelligence model from China’s DeepSeek raised questions about AI investment and the rise of more cost-efficient AI agents.

Then Tuesday brought a rebound, with the stock closing 9% higher. But Wednesday’s early action saw the the stock fall nearly 4%. That shows the AI chipmaker isn’t out of the woods yet, as investors await earnings results from key Nvidia customers after the bell in Microsoft (MSFT), Meta (META), and Tesla (TSLA).