By Sinéad Carew and Lisa Pauline Mattackal
(Reuters) – Wall Street’s major indexes closed lower on Thursday after Fed Chairman Jerome Powell dampened investor hopes for another rate cut this year, saying the U.S. central bank should not rush to ease monetary policy policy.
Powell said at a meeting of the Dallas Fed that with the economy still growing, the labor market solid and inflation still above the 2% target, the Fed can carefully deliberate on rate cuts.
While traders were still betting on a 25 basis point cut at the Fed’s December meeting, the probability fell to 62%, from 76% earlier in the afternoon and from 82.5% on Wednesday, CME FedWatch data showed. tool.
“Powell’s comments put further cold water on what was once a very optimistic view of the path to rate cuts,” said Adam Hetts, Global Head of Multi-Asset at Janus Henderson Investors.
“However, we cannot take for granted that inflation and labor are in balance, so this is an encouraging message about the economy.”
As of 4:13 PM ET, the stock fell 207.33 points, or 0.47%, to 43,750.86, lost 36.21 points, or 0.60%, to 5,949.17 and fell 123.07 points , or 0.64%, to 19,107.65.
Powell spoke after data showed the producer price index for final demand rose 0.2% month-over-month in October, in line with forecasts, although the 2.4% annual increase was slightly higher than expected.
Jobless claims fell by 4,000 to a seasonally adjusted 217,000 for the week ending November 9, lower than forecast.
“There is mounting evidence that inflation remains higher than the Fed’s 2% target,” said Melissa Brown, director of Investment Decision Research at SimCorp in New York. “The numbers were about in line with expectations, but sometimes investors take a step back and say, ‘What does this really mean?’ It creates more uncertainty about what the Fed will do after the December meeting.”
The rally following last week’s US elections has been waning as attention has also shifted to the potential inflationary pressures from policy changes such as higher rates expected from President-elect Donald Trump’s administration.
Some other Fed policymakers have turned their attention back to inflation risks, wondering when, and how quickly and far, to cut rates.
Richmond Fed President Tom Barkin said high union wage settlements and the possibility of coming rate hikes could make Fed officials more cautious about the idea that they have won their battle against high inflation.
Of the S&P 500’s 11 major industrial sectors, industrials was the biggest decliner, down 1.7% on the day, with some of the biggest drag coming from defense companies, which in the days following the elections had risen sharply.
RTX Corp was the largest defense sector weight on Thursday, ending down 3.9% after falling to its lowest level since September 19. General Dynamics (NYSE:) was also a major drag, finishing down 6.9% after hitting its lowest level since October 19. 31.
The blue-chip Dow got some support from a 6% rally in Walt Disney (NYSE:) after the entertainment giant reported quarterly earnings that topped Wall Street estimates and provided robust guidance for the coming years.
Consumer discretionary was the second-weakest sector in the S&P 500, down 1.5%, with some pressure from electric vehicle makers.
Shares of EV maker Tesla (NASDAQ:) closed 5.8% lower Rivian automotive industry (NASDAQ:) fell 14.3% after Reuters reported that the Trump transition team plans to eliminate the $7,500 consumer tax credit for electric vehicle purchases as part of broader tax reform legislation.
Shares of Tapestry (NYSE:) closed 12.8% higher after hitting their highest level since July 2013. Coach The parent company said it was terminating the $8.5 billion deal for Capri Holdings (NYSE:) after the deal was blocked by a US judge. Shares of Capri rose 4.4%.
On the NYSE, there were 177 new highs and 90 new lows.
On the Nasdaq, 1,362 stocks rose and 2,912 fell as declining issues outpaced advancers by a 2.14-to-1 ratio. The S&P 500 posted 26 new 52-week highs and 12 new lows, while the Nasdaq Composite posted 81 new highs. and recorded 190 new lows.
On US stock exchanges, 15.34 billion shares changed hands, compared to the average of 13.68 billion over the past twenty sessions.
