Wall St loses ground after Powell urges caution on rate cuts

FE Team | Published: November 15, 2024 23:46:19

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 U.S. 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 per cent 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 per cent chance, compared with 14 per cent 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 per cent, to 43,601.24, the S&P 500 lost 40.21 points, or 0.68 per cent, to 5,908.96 and the Nasdaq Composite lost 237.47 points, or 1.24 per cent, to 18,870.18.
The small-cap Russell 2000 index was down 0.2 per cent.
Higher Treasury yields pressured megacap stocks. Nvidia edged 1.8 per cent lower, Apple dropped 1 per cent and Microsoft was down 1.7 per cent.
The losses pulled down the information technology index by 1.5 per cent, while the tech-heavy Nasdaq led declines among the major indexes with an over 1 per cent loss.
The Philadelphia SE Semiconductor index slipped 2.2 per cent, bogged down by a 8.8 per cent 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 per cent, while Moderna and Novavax fell more than 4 per cent. Pfizer dipped 4.9 per cent.
"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 per cent, while Ulta was down 2.5 per cent.
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.