U.S. Stock Market Update

By Noel Randewich and Shashwat Chauhan

(Reuters) – The S&P 500 ended down on Wednesday following a hotter-than-expected U.S. inflation reading, raising concerns about the Federal Reserve’s interest rate strategy. Meanwhile, CVS Health (NYSE:CVS) and Gilead Sciences (NASDAQ:GILD) saw gains after positive quarterly reports.

Nvidia (NASDAQ:NVDA) and Amazon (NASDAQ:AMZN) both dipped over 1%, contributing to the S&P 500’s decline.

U.S. consumer prices rose in January at the fastest pace in 18 months, reinforcing the Fed’s stance against rate cuts. This inflation surge posed challenges for President Donald Trump’s tariff proposals, viewed by economists as inflationary.

Interest rate futures now indicate about a 70% chance the Fed will reduce rates by 25 basis points by the end of 2025, a drop from an 80% chance the previous day.

“The market is digesting that the Fed may not cut at all. That’s why the stock market is down,” said Jake Dollarhide, CEO of Longbow Asset Management in Tulsa, Oklahoma.

The S&P 500 declined 0.27%, closing at 6,051.97 points, while the Nasdaq gained 0.03% to 19,649.95 points. The Dow Jones Industrial Average fell 0.50% to 44,368.56 points.

Of the 11 sector indexes in the S&P 500, nine fell, with energy down 2.69% and real estate losing 0.91%.

CVS Health surged 15% after surpassing fourth-quarter profit estimates, signaling improved performance under new CEO David Joyner. Gilead Sciences increased 7.5% following a forecast of 2025 earnings that exceeded analyst expectations.

Fed Chair Jerome Powell continued his congressional testimony on Wednesday, reiterating a cautious approach to rate cuts.

January’s inflation reading is critical, occurring just before the influence of Trump’s recently enacted tariffs. Advisors to Trump are finalizing reciprocal tariffs on countries imposing duties on U.S. imports.

The Cboe Volatility Index, or Wall Street’s “fear gauge,” spiked to its highest level in a week. Treasury yields climbed post-inflation report, with the 10-year note reaching a two-week high.

Lyft (NASDAQ:LYFT) fell 8% after forecasting gross bookings below expectations for the current quarter. Conversely, Robinhood Markets (NASDAQ:HOOD) jumped 5% in extended trading after reporting quarterly revenue that surpassed analysts’ expectations.

In Wednesday’s market activity, declining stocks in the S&P 500 outnumbered rising ones by a ratio of 2.2-to-one. The S&P posted 24 new highs against 24 new lows, while the Nasdaq recorded 75 new highs and 210 new lows.

Volume on U.S. exchanges was light, with 14.8 billion shares traded, compared to an average of 14.9 billion over the prior 20 sessions.