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More than half of the post-Trump stock market rally has been wiped out.
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The turning point came Thursday, when Fed Chairman Powell said the central bank would take its time cutting rates.
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This, coupled with a string of strong economic data, has investors wondering whether a December cut is necessary.
And suddenly, half of the stock market’s euphoric gains after Trump’s election disappeared.
Major US indexes sold off sharply on Friday, led by the tech-heavy Nasdaq, as investors came to terms with the fact that they may not get a rate cut in December as previously expected.
The turning point came Thursday, when Federal Reserve Chairman Jerome Powell said he and the central bank were in in no hurry to lower ratesgiven the positive signals sent by the economy.
Stocks fell in afternoon trading and that pressure continued into Friday. THE S&P500 fell 1.6% and has now given back more than half of its scorching 4% post-election gain. THE Nasdaq Composite fell 2.7% to intraday lows.
The S&P 500 fell 2.2% this week, while the Dow Jones Industrial Average lost 1.2% and the Nasdaq slipped 3.2%.
These losses come as the chances of a 25 basis point rate cut in December have diminished. Investors now rate a 58% chance that there will be one at the next meeting, up from about 80% before Powell’s speech, according to the CME FedWatch Tool.
The central bank chief’s comments come against a backdrop of promising US economic data. Retail sales data showed signs of strength on Friday, and on Thursday, unemployment registration figures came surprisingly light.
Stock investors are grappling with what Trump will ultimately mean for the market, now that the dust is settling on a rush to buy everything. Concerns have been raised about whether Trump’s protectionist trade policies would lead to higher inflation, which could necessitate possible rate hikes.
Until now, investors seemed content to focus on Trump’s plan to cut taxes and deregulate. But now it seems Jerome Powell has given them something else to think about – and worry about.
Here is where the American indices stood on Friday at the 4 p.m. close:
Here’s what else is happening:
