Stocks Little Changed After Fed Holds Rates Steady

Major U.S. stock indexes wobbled Wednesday as investors awaited insights from the Federal Reserve on the economic recovery as well as earnings reports from technology giants.

The S&P 500 was roughly flat in afternoon trading after the Fed held its key interest rate near zero and said it plans to continue supporting the economic recovery.

The Dow Jones Industrial Average fell 0.4%, while the technology-heavy Nasdaq Composite slipped 0.1%.

Investors will be closely monitoring a press conference from Fed Chairman Jerome Powell scheduled to begin at 2:30 p.m. ET. While the U.S. central bank had been widely expected to keep interest rates and bond purchases unchanged, fund managers are listening for any remarks of changes in tone from Mr. Powell’s that might indicate a shift in discussions about monetary policy in coming months.

“Markets are expecting him to dismiss inflation risks and move investors away from those worries,” said Altaf Kassam, head of investment strategy for State Street Global Advisors in Europe. “The market is also expecting him to get a bit closer to coming up with a timeline about tightening policy, which of course he doesn’t want to do. He is going to have to say a lot without saying too much.”

The U.S. central bank has prioritized bolstering the post-pandemic recovery over fighting inflation, and its loose monetary policy has helped fuel the stock market’s rally in recent months.

Stocks have broadly flatlined this week despite a better-than-expected start to the earnings season and signs of the economy recovering. With indexes hovering close to record levels, corporate earnings must cross a high hurdle to support stocks’ rich valuations. There is also some concern about President Biden’s planned tax increases and the surge in coronavirus cases in India.

“The market [is waiting] to see whether we are going to get another breakout in the economic data, how the recovery is progressing and how much stimulus is going to go through,” said Willem Sels, global chief investment officer at HSBC Private Bank. “We are seeing some trade-off between stronger earnings now, which is a positive, and the fear that higher taxes to come could offset that.”

Earnings will also remain in focus as investors look to see how tech companies are coping with changing consumer habits as lockdown restrictions ease. Apple, Facebook and chip maker Qualcomm are expected to post results after markets close, as is Ford Motor.

“There hasn’t been a huge reaction to earnings. The market had anticipated a lot of the improvement because it is reflective of what is happening in the economic data,” said Mr. Sels. “That is why earnings season is all about whether there are new messages, for example, around production and input costs.”

Google’s parent company Alphabet gained 3.9% after reporting results late Tuesday. The tech giant posted record sales for the first quarter, driven by digital ad spending.

Boeing fell 2.7%, weighing on the Dow, after the aircraft maker reported its seventh consecutive quarterly loss and booked a charge on its work replacing Air Force One presidential jets because of problems with a supplier.

Spotify Technology slumped 10% after saying that user growth had softened in the first quarter. Pinterest tumbled 14% after the social media company added fewer users than analysts expected.

Texas Instruments slid 3.8% after the semiconductor maker said it expected second-quarter revenue to be less than analysts had been forecasting.

President Biden is set to outline some of his plans to raise taxes on the highest earning Americans at a speech later Wednesday. The plans are part of a $1.8 trillion proposal that includes new spending on child care and education.

In bond markets, the yield on benchmark Treasurys climbed for a fourth consecutive trading session. The yield on the 10-year note ticked up to 1.645%, from 1.622% Tuesday. Bond yields rise as prices fall.

The New York Stock Exchange. Stocks have broadly flatlined this week despite a better-than-expected start to the earnings season.

Photo: justin lane/Shutterstock

Overseas, the pan-continental Stoxx Europe 600 rose less than 0.1%. Among individual stocks, Deutsche Bank jumped more than 10% after reporting its strongest quarterly earnings in seven years.

Most major Asian markets posted gains. Japan’s Nikkei 225 rose 0.2% while Hong Kong’s Hang Seng added 0.5%. The Shanghai Composite Index rose 0.4%.

Write to Will Horner at William.Horner@wsj.com

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