NEW YORK (Feb 1): US stocks tumbled on the last trading day in January after the Federal Reserve (Fed) held interest rates steady, while dashing hopes for interest rate cuts as soon as March.

The three major US stock indices were already weighed down by weakness in tech and tech-adjacent megacap stocks the day after disappointing Alphabet Inc results.

All three extended losses after the Fed's announcement and chair Jerome Powell's subsequent press conference. The S&P 500 closed with its steepest daily loss since Sept 21.

All three indices still notched gains for the month.

As expected, the Federal Open Market Committee (FOMC) left its key policy rate unchanged at 5.25%-5.50% against a backdrop of gradually cooling inflation and a resilient economy.

In a statement, the FOMC said it "does not expect it will be appropriate to reduce the target range, until it has gained greater confidence that inflation is moving sustainably towards 2%", disappointing investors who had hoped for a quick dovish pivot.

"There were no surprises in the Fed statement," said Oliver Pursche, a senior vice-president at Wealthspire Advisors in New York. "It does appear that further rate hikes are off the table, which is a positive, but investors should continue to expect higher for longer, as we are still quite a ways away from the sort of economic data that would push the Fed to lower rates."

The indices gyrated after Fed chair Jerome Powell said the FOMC is confident it will be appropriate to reduce rates once it has confirmation inflation has been reined in, but effectively ruled out a March rate cut.

"The good news is we can forget about any more tightening," said Art Hogan, the chief market strategist of B Riley Wealth in New York. "The bad news it's 'when', not 'if', they are going to cut rates, and that 'when' has been pushed out to what had been the fringes of consensus."

The Dow Jones Industrial Average fell 317.01 points, or 0.82% , to 38,150.30, the S&P 500 lost 79.32 points, or 1.61%, to 4,845.65, and the Nasdaq Composite lost 345.88 points, or 2.23%, to 15,164.01.

All 11 major US stock indices ended in the red, with communication services and tech shares suffering the largest percentage losses.

The fourth-quarter earnings season has shifted into overdrive, with nearly one in five companies in the S&P 500 slated to report this week.

Thus far, 176 have posted results. Of those, 80% have beaten expectations, according to LSEG.

Analysts now see aggregate fourth-quarter S&P 500 earnings growth of 6.1% year-on-year, an improvement over the 4.7% forecast at the end of the quarter, per LSEG.

Alphabet shares slid 7.5% the day after the Google parent reported disappointing ad sales, and projected an increase in capital spending to boost its artificial intelligence (AI) capabilities.

Microsoft Corp also forecast rising costs to develop AI features, but its quarterly results beat analyst expectations. Its shares were last off 2.7%.

Shares in New York Community Bancorp tumbled 37.7%, touching their lowest level in over two decades, after the bank holding company posted a surprise loss and slashed its dividend. The KBW Regional Bank Index slid 6%.

A spate of economic indicators released on Wednesday, including fourth-quarter employment costs and ADP's employment index, suggested some easing in the labour market, viewed by the Fed as a necessary precondition for bringing inflation down to its 2% annual target.

Declining issues outnumbered advancers by a three-to-one ratio on the New York Stock Exchange. There were 326 new highs and 56 new lows on the exchange.

On the Nasdaq 1,136 stocks rose and 3,160 fell, as declining issues outnumbered advancers by about a 2.8-to-one ratio.

The S&P 500 posted 59 new 52-week highs and three new lows, while the Nasdaq recorded 132 new highs and 125 new lows.

Volume on US exchanges was relatively heavy, with 13.3 billion shares traded, compared with an average of 11.5 billion shares over the previous 20 sessions.