Nasdaq edges up, S&P 500 flat after Fed rates hold

The Nasdaq has risen slightly with a boost from chip stocks while the S&P 500 closed virtually unchanged after the Federal Reserve kept interest rates unchanged as expected and gave little indication when borrowing costs might fall again.

The Dow Jones Industrial Average rose 12.19 points, or 0.02 per cent, to 49,015.60 on Wednesday, the S&P 500 lost 0.57 points, or 0.01 per cent, to 6,978.03 and the Nasdaq Composite gained 40.35 points, or 0.17 per cent, to 23,857.45.

The benchmark S&P 500 index had briefly topped the 7,000 points milestone for the first time earlier in the day but couldn't hold its gains.

Fed eyes inflation fears

In its statement, the Fed cited still-elevated inflation alongside solid economic growth for its decision.

The US central bank said the job market has "shown some signs of stabilisation" ⁠and removed language from its prior statement saying downside risks to employment had risen.

Investors had widely expected the central bank to keep rates unchanged at 3.5 per cent-3.75 per cent, and it said eight out of 10 policymakers had voted to hold rates steady.

After the statement, traders boosted their bets that the Fed would cut short-term borrowing costs in June - but not before then.

In his closely monitored press conference, Fed Chair Jerome Powell was careful not to comment on future rate decisions, saying the Fed would be data-dependent, but he told reporters the upside risks to inflation and downside risks to employment ‌have diminished.

"Whether you were bullish or bearish going into the press conference you walked away feeling about the same," said Michael James, equity sales trader at Rosenblatt Securities.

Energy and tech lead gains

Among the 11 major S&P 500 sectors the biggest decliners were real estate, consumer staples and healthcare.

The biggest advances came in energy, up 0.7 per cent and technology, up ‌0.6 per cent.

Technology's biggest index point contributions came from chip stocks with earnings reports in focus.

The biggest boost was from AI chip leader Nvidia, up 1.6 per cent, followed by Micron, which rose 6 per cent and then Intel, which jumped 11 per cent.

'Magnificent Seven' earnings in focus

After the Fed update, investors turned their attention to the kickoff of earnings from the so-called "Magnificent Seven" companies, (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), which have driven the AI trade, powering markets to record levels.

Meta and Tesla shares gained nearly four per cent and three per cent respectively, in late trading after their reports were released following the market close.

While Microsoft shares fell more than 3 per cent after its report was released, shares in bellwether IBM jumped seven per cent following its results.

With lofty valuations driving rotation into undervalued areas of the market, the group's capital plans are being closely watched as investors question whether AI spending will drive returns.