Wall Street loses ground as Powell urges caution on interest rate cuts
- 2 hours ago
Wall Street’s main indexes tumbled on Friday after Federal Reserve Chair Jerome Powell said there was no need to rush interest-rate cuts, pushing up US Treasury yields and pressuring equities.
In a speech on Thursday, Powell pointed to ongoing economic growth, a solid job market, and inflation above the Fed’s 2% target as reasons the central bank can afford to be careful as they determine the pace and scope of rate cuts going forward.
Powell’s comments came after both consumer and producer prices data this week pointed to persistent inflation. On Friday, data showed US retail sales increased slightly more than expected in October, but underlying momentum in consumer spending appeared to slow at the start of the fourth quarter.
Traders increased bets that the Fed will keep rates on hold at its December meeting - pricing in a 41.3% chance, compared with 14% a month ago, according to the CME FedWatch tool.
“The retail sales number was overall pretty good. That’s exactly what Powell was talking about yesterday, where if the economy continues to be reasonably strong and inflation is approaching our target, they can afford to be patient and go slower with rate cuts than previously thought,” said Mike Dickson, head of research and quantitative strategies at Horizon Investments.
The Dow Jones Industrial Average fell 149.62 points, or 0.34%, to 43,601.24, the S&P 500 lost 40.21 points, or 0.68%, to 5,908.96 and the Nasdaq Composite lost 237.47 points, or 1.24%, to 18,870.18.
The small-cap Russell 2000 index was down 0.2%.
Higher Treasury yields pressured megacap stocks. Nvidia edged 1.8% lower, Apple dropped 1% and Microsoft was down 1.7%.
The losses pulled down the information technology index by 1.5%, while the tech-heavy Nasdaq led declines among the major indexes with an over 1% loss.
The Philadelphia SE Semiconductor index slipped 2.2%, bogged down by a 8.8% decline in Applied Materials after it forecast first-quarter revenue below Wall Street estimates on Thursday.
All three major US stock indexes were headed for weekly losses as a sharp post-election rally fizzled out and market focus shifted to the state of the economy and potential inflation risks under a new administration.
Stocks of vaccine makers dipped after the President-elect selected Robert F Kennedy Jr, who has spread misinformation on vaccines, to head the Department of Health and Human Services.
BioNTech dropped 5%, while Moderna and Novavax fell more than 4%. Pfizer dipped 4.9%.
“We are getting more visibility into who’s going to be surrounding Trump and what their policies represent. And that’s caused a little bit of the pause lately,” said Dickson of Horizon Investments.
Warren Buffett’s Berkshire Hathaway said on Thursday it made new investments in Domino’s Pizza and sold its entire stake in Ulta Beauty.
Domino’s shares were up 2%, while Ulta was down 2.5%.
Advancing issues outnumbered decliners by a 1.06-to-1 ratio on the NYSE and by a 1.5-to-1 ratio on the Nasdaq.
The S&P 500 posted 3 new 52-week highs and 8 new lows while the Nasdaq Composite recorded 14 new highs and 91 new lows.
Oil prices edged lower on Friday, heading for a weekly loss, as investors digested waning Chinese demand and a possible slowing of the US Federal Reserve’s interest rate cut path.
Brent crude futures dropped 72 cents, or 1%, to $71.84 a barrel by 1417 GMT. US West Texas Intermediate crude futures were down 72 cents, or 1.05%, at $67.98.
For the week, Brent is set to fall over 2% while WTI is set to decline more than 3%.
China’s oil refiners in October processed 4.6% less crude than a year earlier because of plant closures and reduced operating rates at smaller independent refiners, data from the National Bureau of Statistics showed on Friday.
The country’s factory output growth slowed last month and demand woes in its property sector showed few signs of abating, adding to investors’ concerns over the economic health of the world’s largest crude importer.
“China served a timely reminder about the true state of its oil sector. The country’s refinery throughput declined for the seventh successive month in October,” PVM analyst Tamas Varga said.
Speaking on Thursday, Fed chair Jerome Powell said the US central bank did not need to rush to lower interest rates. Lower interest rates typically spur economic growth, aiding fuel demand.
Oil prices also fell this week as major forecasters indicated slowing global demand growth.
“Global oil demand is getting weaker,” said International Energy Agency (IEA) Executive Director Fatih Birol on Friday at the COP29 summit.
“We have been seeing this for some time and this is mainly driven by the slowing Chinese economic growth and the increasing penetration of electric cars around the world.” The IEA forecasts global oil supply to exceed demand by more than 1 million bpd in 2025 even if cuts remain in place from OPEC+.
OPEC meanwhile cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India and other regions.
Agencies
