(Reuters)

U.S. stocks initially wavered but rose on Wednesday after the U.S. Federal Reserve left its key interest rate unchanged, as expected, but indicated that its next move will probably be to cut rates.

The three major U.S. stock indexes were last in positive territory.

The Federal Open Markets Committee (FOMC) concluded its two-day monetary policy meeting with a unanimous decision to let the Fed funds target rate stand at 5.25 per cent-5.50 per cent.

“They left rates unchanged and the note mentions a lack of further progress on inflation,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “That’s no surprise.”

The accompanying statement left the timing of any rate cut in doubt, and Fed officials underscored their concern that the first months of 2024 have done little to build the confidence they seek in falling inflation.

At a press conference, Chair Powell said the central bank remains committed to its 2 per cent inflation target and that the labor market was normalizing, citing data released on Wednesday showing job openings dropping to a three-year low.

First-quarter reporting season has breezed passed the halfway point, with 310 of the companies in the S&P 500 index having reported. Of those, 77 per cent posted consensus-beating earnings, according to LSEG.

Analysts now expect aggregate first-quarter S&P 500 earnings growth of 6.6 per cent year-on-year, a significant improvement over the 5.1 per cent estimate as of April 1, LSEG data showed.

Among individual companies, Advanced Micro Devices shed 7.4 per cent after its disappointing artificial intelligence chip sales forecast, while Super Micro Computer slid 11.0 per cent following the company’s quarterly revenue miss.

The weak results pulled the Philadelphia Semiconductor Index 1.3 per cent lower.

Amazon.com rose 4.5 per cent on better-than-expected quarterly results as interest in AI helped drive cloud-computing growth.

Johnson & Johnson advanced 4.8 per cent after it said it will proceed with a proposed $6.48 billion lawsuit settlement over allegations that its baby powder and other talc products cause ovarian cancer.

Starbucks tumbled 17.2 per cent after the coffee chain cut its sales forecast as it posted the first drop in same-store sales in nearly three years.

CVS Health plunged 16.9 per cent after the healthcare company’s earnings fell short of consensus and it slashed its annual profit forecast.

At 2:46 p.m. ET, the Dow Jones Industrial Average rose 438.28 points, or 1.16 per cent, to 38,254.2. The S&P 500 gained 40.06 points, or 0.80 per cent, at 5,075.75 and the Nasdaq Composite added 177.25 points, or 1.13 per cent, at 15,835.07.