US STOCKS-S&P 500 ends lower as Fed hints at hawkish tightening timeline

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NEW YORK, Jan 26 (Reuters) - The S&P 500 ended lower on Wednesday, taking an abrupt nosedive that reversed earlier solid gains after the U.S. Federal Reserve released its statement at the conclusion of its two-day policy meeting.

The Dow joined the S&P in negative territory, while the Nasdaq saw a late session recovery to close nominally higher.

While all three indexes enjoyed a brief surge after the Federal Open Markets Committee left key interest rates near zero, those gains quickly evaporated as the Fed statement warned it would soon begin raising the Fed Funds target rate to combat persistent inflation related to the COVID-hobbled supply chain.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the statement said.

Stocks slid into negative territory once Fed Chairman Jerome Powell’s subsequent Q&A got under way, during which he warned that inflation remains above its long-run goal and supply problems are bigger and more long-lasting than previously thought.

“When reporters asked Powell if the Fed would consider raising rates at every meeting, which would mean more than four times this year, he didn’t say they wouldn’t, which indicates a flexibility to raise rates much more quickly (if necessary) than anyone was expecting,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

According to preliminary data, the S&P 500 lost 6.65 points, or 0.15%, to end at 4,349.80 points, while the Nasdaq Composite gained 0.2% The Dow Jones Industrial Average fell 121.83 points, or 0.36%, to 34,175.90.

Fourth-quarter reporting season has hit full stride, with one-fifth of the companies in the S&P 500 having posted results. Of those, 81% have beaten consensus, according to Refinitiv data.

Microsoft Corp gained after current-quarter revenue guidance, driven in part by its cloud business, came in above consensus.

Boeing Co closed lower after the plane maker said it incurred $4.5 billion in charges in the fourth quarter related to its sidelined 787.

Toy maker Mattel Inc jumped after regaining the right from rival Hasbro Inc to produce toys based on Walt Disney Co’s “Frozen” franchise.

Tesla Inc was expected to post quarterly results after market close.

Reporting by Stephen Culp in New York Additional reporting by Sinead Carew in New York, and Susan Mathew, Devik Jain and Bansari Mayur Kamdar in Bengaluru Editing by Matthew Lewis