- Stock indexes retreated as investors digested Thursday commentary from Fed Chair Jerome Powell.
- The odds of a 25-basis-point rate cut in December fell sharply after Powell’s address.
- Bond yields also climbed on the comments, and amid signs of economic strength.
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US equities slumped Friday morning as Wall Street pulled back rate-cut expectations for December.
The scaling-back started on Thursday afternoon after Federal Reserve Chair Jerome Powell indicated that central bank will take its time in easing policy, citing ongoing US economic strength.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” he said.
The odds of a 25-basis-point rate cut fell to less than 60% shortly after Powell’s comments, down from 80%, as calculated by the CME FedWatch Tool. The probability remained lower, around 58%, on Friday morning.
Also impacting rate-cut expectations is a streak of encouraging economic data. New figures on Friday showed US retail sales advanced in October, boosted by a jump in autos purchases.
While the three major indexes headed for their first losing week since the election, bond yields climbed. The 2-year yield — most sensitive to near-term rate forecasts — has risen 7 basis points in the last two days.
Here’s where US indexes stood shortly after the 9:30 a.m. opening bell on Friday:
- S&P 500: 5,905.37, down 0.7%
- Dow Jones Industrial Average: 43,547.05, down 0.5% (213 points)
- Nasdaq composite: 18,859.96, down 1.3%
Here’s what else is going on:
- 3 stock market rally drivers are hitting extremes and pointing to low returns, David Rosenberg said.
- David Einhorn is loading up on a CNH Industrial, a cheap agricultural stock ‘no one cares about.’
- Investors underestimate how deep rate cuts will be in 2025, Goldman Sachs says.
- China’s weak economy and record US production will lead to a surplus of one million barrels of oil a day next year, IEA says.
In commodities, bonds, and crypto:
- Oil markets were down. West Texas Intermediate crude slid 0.96% to $68.04 a barrel. Brent crude, the international benchmark, fell 0.94% to $71.88 a barrel.
- Gold stayed essentially flat at $2,572 an ounce.
- The 10-year Treasury climbed 4 basis points to 4.459%.
- Bitcoin jumped 2.28% to $90,053.
