US STOCKS-Wall Street ends down but off day's lows; Fed holds rates steady

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By Caroline Valetkevitch

NEW YORK, Jan 29 (Reuters) - U.S. stocks ended lower but off their lows of the day on Wednesday as the Federal Reserve held interest rates steady as expected and Fed Chair Jerome Powell offered soothing comments on the economy.

Technology shares were the biggest drags on the S&P 500, with Nvidia NVDA.O and Microsoft MSFT.O among stocks leading the way down.

Nvidia led a tech selloff on Monday after Chinese startup DeepSeek launched AI models it said were cost-effective and ran on less advanced chips compared to OpenAI.

Stocks initially extended losses after the Fed statement, with the U.S. central bank dropping language saying inflation "has made progress" towards the Fed's 2% inflation goal, noting only the pace of price increases "remains elevated."

The decision to hold the policy rate steady was widely anticipated following three consecutive rate cuts in 2024 that reduced the Fed's benchmark rate by a full percentage point. The Fed gave little insight into when further reductions in borrowing costs may take place.

Speaking at a press conference following the release of the policy statement, Powell said "we do not need to be in a hurry to adjust our policy stance" and monetary policy is "well positioned" for the challenges at hand.

"Powell does a great job of calming markets," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma, noting, "a strong economy gives the Fed plenty of wiggle room."

Powell also said it is too soon to say what President Donald Trump's policies will do and the central bank will take its time assessing what the new government policy regime means.

According to preliminary data, the S&P 500 .SPX lost 29.03 points, or 0.48%, to end at 6,038.67 points, while the Nasdaq Composite .IXIC lost 106.08 points, or 0.54%, to 19,627.51. The Dow Jones Industrial Average .DJI fell 140.04 points, or 0.31%, to 44,710.31.

"The Fed didn't hit the markets with any surprises," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Traders are pricing in around 44 basis points of cuts by year-end, down from around 48 basis points before the Fed statement. That reflects falling confidence that the U.S. central bank will make two 25 basis point rate reductions this year.

Quarterly results from Microsoft, Facebook-parent Meta META.O and Tesla TSLA.O are expected after the bell.

Investors have been worried about Trump's proposed tariffs, which could exacerbate inflationary pressures and slow the pace of rate cuts.

The December reading of the personal consumption expenditures price index, a crucial metric in assessing the inflation trajectory, is due on Friday.