GLOBAL MARKETS-Wall Street stocks down, Treasury yields up as Fed leaves rates unchanged

Updates to afternoon US trading, Fed statement

By Lawrence Delevingne, Marc Jones

BOSTON/LONDON, Jan 29 (Reuters) - U.S. equity indexes dipped and Treasury yields pushed higher on Wednesday after the Federal Reserve held interest rates steady and gave little insight into when further reductions in borrowing costs may take place.

After several months in which inflation data has largely moved sideways, the U.S. central bank dropped from its latest policy statement language saying that inflation "has made progress" towards the Fed's 2% inflation goal, noting only that the pace of price increases "remains elevated."

"Businesses are expanding operations, consumers have a healthy appetite for travel and leisure, and animal spirits are still elevated," Jeffrey Roach, Chief Economist for LPL Financial, said in an email. "These conditions make it difficult for the Fed to cut rates without reigniting broad inflation pressures."

Animal spirits is a term referring to how emotions shape financial decisions.

The Dow Jones Industrial Average .DJI fell 0.37%, to 44,683, the S&P 500 .SPX lost 0.62%, to 6,028 and the Nasdaq Composite .IXIC dropped about 0.9%, to 19,560.

European shares had earlier climbed to a record high as strong results from Dutch chip equipment maker ASML ASML.AS sent its stock soaring 5.5% and hoisted the wider tech sector .SX8P by 2.5%. .EU

The parts of Asia that were not on Lunar New Year holidays gained overnight too, while Wall Street's three main indices had been muted ahead of the trio of "Magnificent 7" earnings - Microsoft MSFT.O, Meta META.O and Tesla TSLA.O.

Investors seemed to have papered over the global rout suffered on Monday when the emergence of a lower-cost Chinese AI model, DeepSeek, wiped more than half a trillion dollars off Nvidia's NVDA.O value alone.

In bond markets, the 10-year U.S. Treasury yield rose 2.2 basis points to 4.571%, while the 2-year note US2YT=RR yield, which typically moves in step with interest rate expectations for the Fed, increased 3.1 basis points to 4.236%.

European yields were steady, with the ECB expected to cut its rates again on Thursday, while the yen JPY=EBS nudged higher to 155.28 per dollar after Bank of Japan meeting minutes pointed to more rate hikes there. /FRXGVD/EUR

BIG TECH EARNINGS

Attention is now on the mega-cap tech earnings due from Facebook owner Meta, Microsoft and Tesla after the closing bell on Wednesday.

"While questions remain unanswered, the market is voting that the innovation that DeepSeek could bring to the ecosystem will unlikely impact the AI capex cycle and could even lead to new channel of demand for GPUs (graphics processing units)," Pepperstone strategist Chris Weston said.

Meta CEO Mark Zuckerberg said on Friday the company plans to spend as much as $65 billion this year to expand its AI infrastructure, putting costs above Wall Street estimates.

Microsoft's quarterly revenue forecast will show whether billion-dollar bets on AI are propelling increased growth.

And Tesla investors will look for more details on the automaker's lower-priced model as some expect the cheaper car to help the company hit its goal to increase deliveries by up to 30% this year.

Traders were also digesting Trump's latest tariff threats.

The White House said he still plans to hit Mexico and Canada with steep tariffs on Saturday and he is "very much" considering some on China during the weekend.

The dollar index =USD, which measures the greenback against a basket of currencies including the yen and the euro, was flat.

Oil prices eased, with Brent crude oil futures LCOc1 dipping to $76.82 per barrel, continuing a recent decline. U.S. West Texas Intermediate crude CLc1 sagged to $72.88 after a similar slide.

The day's crypto action meanwhile came from the Czech Republic where its central bank Governor Ales Michl said in an interview with the Financial Times he would present a plan to the bank's board on Thursday to buy bitcoin. He added that, if approved, the bank could eventually hold as much as 5% of its 140 billion euro ($146.13 billion) reserves in the cryptocurrency.

Bitcoin BTC= was last trading at $103,658, up about 3.3%.