US STOCKS-S & P 500, Dow Rise As Investors Digest Earnings, Rate Cut

Alphabet falls nearly 8% after downbeat earnings, heavy AI spend

Indexes: Dow up 0.47%, S&P 500 up 0.19%, Nasdaq down 0.07%

(Updates as of mid afternoon)

By Abigail Summerville and Shashwat Chauhan

The S&P 500 and the Dow increased on Wednesday, as investors began to brush off disappointing Alphabet profits and weighed the prospect of future rate of interest cuts from the U.S. Federal Reserve.

Google-parent Alphabet dropped 7.3% after publishing downbeat cloud profits growth on Tuesday and earmarking a higher-than-expected $75 billion financial investment for its AI buildout this year.

AI-related stocks revealed indications of recovery after being rocked recently following the skyrocketing appeal of a low-priced Chinese synthetic intelligence design developed by startup DeepSeek. Nvidia, which signed up among the biggest losses, was up 3.3% on Wednesday.

"Ultimately, demand is not going away for AI even with the DeepSeek news. They ´ re all going to need to invest more money which ´ s what the AI story has been. This is a fairly long cycle story," said Rob Haworth, senior investment strategist at U.S. Bank Asset Management.

Advanced Micro Devices, on the other hand, lost 8.2% after CEO Lisa Su said the company's current-quarter data center sales - a proxy for its AI earnings - would fall about 7% from the previous quarter.

On the data front, investors are expecting the January nonfarm payrolls report, expected to be released on Friday.

U.S. services sector activity unexpectedly slowed in January amid cooling need, helping curb rate development, a report from the Institute for Supply Management showed on Wednesday.

"There are some concerns that the Fed might need to reduce much faster, that the economy is slowing, however that ´ s in fact favorable news for the marketplaces because they ´ re trying to find those Fed rate cuts," Haworth said.

The next Federal Open Markets Committee conference remains in March, and while just 16.5% of traders anticipate a then, a bulk of traders expect a cut in June, according to CME's FedWatch Tool.

Richmond Fed president Thomas Barkin said the Fed was still leaning towards more rate cuts this year, however flagged uncertainty around the impact of new tariffs, immigration, policies and other initiatives from U.S. President Donald Trump's administration.

At 2:00 p.m. ET (1900 GMT), the Dow Jones Industrial Average increased 207.53 points, or 0.47%, to 44,763.57, the S&P 500 gained 11.61 points, or 0.19%, users.atw.hu to 6,049.49 and the Nasdaq Composite lost 12.91 points, users.atw.hu or morphomics.science 0.07%, to 19,641.11.

Nine of the 11 S&P 500 sectors traded greater, with realty and utility stocks leading the gains while interaction services tipped over 3%.

Shares of Apple slipped 1.2% as Bloomberg News reported that China's antitrust regulator was preparing for a possible investigation of the iPhone maker.

Fiserv advanced 7.3% as the payments company beat price quotes for fourth-quarter revenue, helped by strong demand in its banking and payments processing unit.

Markets likewise await advancements on the tariffs front after Trump said on Tuesday he remained in no hurry to speak with Chinese President Xi Jinping to try to defuse a brand-new trade war between the nations.

The Cboe Volatility Index, known as Wall Street's worry gauge, dropped 6.3% to 16.1 today.

In business movers, FMC Corp plunged 32% after the agrichemicals producer forecast first-quarter revenue below quotes.

Johnson Controls jumped 12.5% as the building options company named Joakim Weidemanis as primary executive officer and raised its 2025 earnings projection.

Advancing problems outnumbered decliners by a 2.62-to-1 ratio on the New York Stock Exchange, and by a 1.88-to-1 ratio on the Nasdaq.

The S&P 500 posted 31 new 52-week highs and 12 new lows while the Nasdaq Composite recorded 100 new highs and 85 brand-new lows.

(Reporting by Abigail Summerville in New York City, Shashwat Chauhan and Sukriti Gupta in Bengaluru; Editing by Pooja Desai, Devika Syamnath, Maju Samuel and Nia Williams)