US STOCKS-Nasdaq ends slightly up, S&P 500 flat as Fed brings little surprise

By Sinéad Carew and Pranav Kashyap

Jan 28 (Reuters) - The Nasdaq rose slightly with a boost from chip stocks while the S&P 500 closed virtually unchanged on Wednesday as investor reactions were muted after the Federal Reserve kept interest rates unchanged as expected and gave little indication when borrowing costs might fall again.

In its statement, the Fed cited still-elevated inflation alongside solid economic growth for its decision. The U.S. central bank said the job market has "shown some signs of stabilization" and removed language from its prior statement saying that downside risks to employment had risen.

Investors had widely expected the central bank to keep rates unchanged at 3.5%–3.75% and it said that eight out of 10 policymakers had voted to hold rates steady. After the statement, traders boosted their bets that the Fed would cut short-term borrowing costs in June - but not before then.

And in his closely monitored press conference, Fed Chair Jerome Powell was careful not to comment on future rate decisions, saying that the Fed would be data-dependent, but he told reporters that the upside risks to inflation and downside risks to employment have diminished.

"Whether you were bullish or bearish going into the press conference you walked away feeling about the same," said Michael James, equity sales trader at Rosenblatt Securities.

"Employment and inflation risks have downsized, but inflation overall remains stubborn. There hasn't been a meaningful enough change in the employment market to warrant the Fed doing something. There hasn't been a meaningful enough improvement in inflation to allow the Fed to be more aggressive with further cuts," James added.

The Dow Jones Industrial Average .DJI rose 12.19 points, or 0.02%, to 49,015.60, the S&P 500 .SPX lost 0.57 points, or 0.01%, to 6,978.03 and the Nasdaq Composite .IXIC gained 40.35 points, or 0.17%, to 23,857.45.

The benchmark S&P 500 index had briefly topped the 7,000 points milestone for the first time earlier in the day but couldn't hold its gains.

Among the 11 major S&P 500 sectors the biggest decliners were real estate .SPLRCR, consumer staples .SPLRCS and healthcare .SPXHC.

The biggest advances came in energy .SPNY, up 0.7% and technology .SPLRCT, up 0.6%.

Technology's biggest index point contributions came from chip stocks with earnings reports in focus.

The biggest boost was from AI chip leader Nvidia NVDA.O, up 1.6%, followed by Micron MU.O, which rose 6% and then Intel INTC.O, which jumped 11%.

Earlier SK Hynix , a key Nvidia supplier, reported a record quarterly profit and ASML booked its highest ever fourth-quarter orders, igniting a tech rally from Europe to Asia.

Texas Instruments TXN.O shares jumped 9.9% after the analog chipmaker forecast first-quarter revenue and profit above Wall Street estimates late on Tuesday. Seagate Technology STX.O shares finished up more than 19% after it forecast third-quarter revenue and profit above Wall Street expectations and its rival Western Digital WDC.O also rallied 10.7%.

'MAG 7' KICKS OFF EARNINGS

After digesting the Fed update, investors then turned their attention to the kickoff of earnings from the so-called "Magnificent Seven" companies, which have driven the AI trade, powering markets to record levels.

Meta META.O and Tesla TSLA.O shares gained nearly 4% and 3% respectively, in late trading after their reports were released following the market close. While Microsoft MSFT.O shares fell more than 3% after its report was released, shares in bellwether IBM IBM.N jumped 7% following its results.

With lofty valuations driving rotation into undervalued areas of the market, the group's capital plans are being closely watched as investors question whether AI spending will drive returns.

Elsewhere in earnings, shares in AT&T T.N rose after the U.S. carrier projected annual profit above market expectations.

In industrials, however, Textron TXT.N shares sank 7.9% after it guided for a fiscal profit below estimates, while Otis OTIS.N stock slipped after its fourth-quarter revenue missed expectations.

Declining issues outnumbered advancers by a 1.37-to-1 ratio on the NYSE where there were 593 new highs and 97 new lows.

On the Nasdaq, 1,710 stocks rose and 3,029 fell as declining issues outnumbered advancers by a 1.77-to-1 ratio. The S&P 500 posted 38 new 52-week highs and 14 new lows while the Nasdaq Composite recorded 102 new highs and 125 new lows.

On U.S. exchanges, 19.03 billion shares changed hands compared with the 18.29 billion 20-day moving average.