Dow Tumbles 600 Points as Fed Says Pace of Recovery Has 'Moderated'

Stocks end lower as the Federal Reserve says it is seeing signs that an economic recovery 'has moderated in recent months.'
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Stocks finished lower Wednesday after the Federal Reserve kept rates near zero, maintained its bond-buying program at the current pace, and said it saw signs that an economic recovery "has moderated in recent months."

The Dow Jones Industrial Average ended down 633 points, or 2.05%, to 30,303, the S&P 500 slumped 2.57% and the Nasdaq dropped 2.61%. Equities had their worst day since October.

Stocks had been lower Wednesday ahead of the Fed's announcement as investors turned cautious with earnings from Tesla  (TSLA) - Get Report, Facebook  (FB) - Get Report and Apple  (AAPL) - Get Report scheduled for after the closing bell.

“The pace of the recovery in economic activity and employment has moderated in recent months, with weakness concentrated in the sectors most adversely affected by the pandemic,” the central bank said in a statement following its first meeting of 2021.

The Federal Reserve also committed to maintaining its bond-buying program at $120 billion a month until it witnessed “substantial further progress” in employment and on its inflation goals.

In a news conference, Fed Chairman Jerome Powell emphasized it would take "some time" before that progress was made.

"The economy is a long way from our employment and inflation goals," Powell said Wednesday, "and it is likely to take some time for substantial further progress to be achieved."

Powell declined to comment on any individual stock or a single-day move in the equity market. GameStop  (GME) - Get Report and AMC Entertainment  (AMC) - Get Report skyrocketed as heavily shorted names rode higher in a battle between retail investors and Wall Street hedge funds.

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Market sentiment also was weighed down by uncertainty surrounding President Joe Biden's $1.9 trillion coronavirus relief plan, given the Democrats' slim majority in the Senate and data showing that confirmed global cases of Covid-19 surpassed 100 million.

Biden said the U.S. government was working to buy 200 million more doses of Covid-19 vaccines, enough to fully inoculate nearly every American by the end of the summer, according to the president.

The administration intends to order 100 million more doses each from Pfizer  (PFE) - Get Report and Moderna  (MRNA) - Get Report.

"The Fed has recognized recent economic data has slowed with the decline in consumer spending and employment," said Charlie Ripley, senior investment strategist at Allianz Investment Management. 

"Ultimately, the Fed appears comfortable with the current repercussions of their policy stance as they continue to work towards the goals of the dual mandate."

Microsoft  (MSFT) - Get Report finished 0.3% higher Wednesday after the software giant posted much stronger-than-expected fiscal second-quarter earnings thanks in part to a surge in cloud revenue and a big jump in personal computer sales.

Boeing  (BA) - Get Report gave up 4%. It reported a fourth-quarter loss well wider than analysts' expectations and delayed the launch of its 777X widebody airplane as it continued to grapple with generational changes in airline demand triggered by the global coronavirus pandemic.

AT&T  (T) - Get Report posted stronger-than-expected fourth-quarter earnings and overall revenue as wireless and broadband network growth offset a drop in revenue in its WarnerMedia unit. AT&T shares lost 2%.

Tesla  (TSLA) - Get Report, Apple  (AAPL) - Get Report and Facebook  (FB) - Get Report will be reporting earnings after the closing bell Wednesday.

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