US stocks took a sharp downturn on Friday, heading for substantial weekly declines as investors responded to Federal Reserve Chair Jerome Powell’s message that interest-rate cuts won’t be rushed. The S&P 500 (^GSPC) fell 1.4%, while the Dow Jones Industrial Average (^DJI) dropped 0.7%. The tech-focused Nasdaq Composite (^IXIC) experienced the most significant dip, sinking nearly 2.5%.
Market Sentiment Dampened by Powell’s Stance
Powell’s hawkish remarks have put pressure on market optimism, particularly as initial enthusiasm over President-elect Donald Trump’s economic policies starts to wane. The S&P 500 has already retraced about one-third of its post-election rally, with the Nasdaq bracing for a weekly decline exceeding 3%.
Consumer Resilience Amid Fed Concerns
Retail sales data released on Friday pointed to ongoing strength among US consumers, an indicator Powell cited as justification for the Fed’s patient stance. October saw retail sales rise by 0.4% month-over-month, surpassing the 0.3% forecast. Additionally, September’s retail sales were revised upward to 0.8% from the initially reported 0.4%.
Fed Rate Path Uncertainty Persists
Wall Street remains fixated on the Fed’s future monetary policy, a topic further complicated by this week’s mixed inflation data. As of Friday morning, the CME FedWatch tool indicated that traders were pricing in a 62% chance of a rate cut at the December meeting, down from 72% just a day earlier. Expectations for a January rate cut have also eased, with current odds at 74%, compared to 81% previously.
Eye on Trump’s Transition and Market Reactions
Investor attention also remains on President-elect Trump’s transition efforts. Speculation over potential appointments is influencing sectors, with vaccine stocks slipping after reports that Robert F. Kennedy Jr. could be appointed as a top health official. Additionally, JPMorgan Chase CEO Jamie Dimon confirmed on Thursday that he will not be joining Trump’s administration.
