Wall Street’s main indices closed lower on Friday, with the S&P 500 and Nasdaq posting their biggest one-day losses in two weeks, due to concerns about slower interest rate cuts and investors’ reaction to US President-elect Donald Trump’s cabinet picks.
Federal Reserve Chairman Jerome Powell on Thursday cited continued economic growth, a solid job market and inflation above the U.S. central bank’s 2% target as reasons he can afford to be careful about the pace and scope of future rate cuts.
Traders have increased bets that the Fed will not change rates at its December meeting, pricing in a chance of about 42%, up from about 14% a month ago, according to the CME FedWatch tool. They also lowered expectations for easing in 2025.
That view was reinforced by economic data on Friday that showed U.S. retail sales rose slightly more than expected in October. Import prices also recovered and data released on Wednesday and Thursday showed stable inflation.
“In the last 48 hours, we’ve had some pretty big changes, not just because of the election, but also because of the economic data that was better than expected and Powell’s speech about not needing to be so aggressive in cutting interest rates,” said Adam Rich, deputy chief investment officer at Vaughan Nelson in Houston.
“Market expectations regarding interest rate cuts have fallen substantially and the market is also readjusting following a very optimistic reaction to the US elections.”
Friday’s declines capped a week in which the market’s focus shifted from Trump’s US election victory, seen as a pro-business choice, to concerns about the path of rate cuts and possible inflation risks under the next government.
For the week, the S&P 500 fell 2.08%, while the Nasdaq fell 3.15%, marking its biggest weekly losses in more than two months. The Dow fell 1.24% for the week.
“Volumes are high today. People are taking profits because this has been a good month. US stocks are doing well this month. But this is not wholesale profit-taking,” said John Augustine, chief investment officer at Huntington National Bank, pointing to the gains in the utilities sector. “That suggests more rotation.”
Shares of vaccine makers and packaged food companies also fell after Trump said he would nominate Robert F. Kennedy Jr., who has spread misinformation about vaccines and criticized ultra-processed foods, to head the Department of Health and Human Services.
The Dow Jones fell 0.70%, to 43,444 points; the S&P 500 lost 1.32%, to 5,870 and the Nasdaq Composite fell 2.24%, to 18,680 points.
By Sinéad Carew and Lisa Pauline Mattackal
