On Thursday, S&P 500 witnessed a drop as Jerome Powell, the Chairman of the Federal Reserve, indicated that there is no urgency for the Federal Reserve to slash rates. Instead, a more cautious approach could be adopted towards easing monetary policies.
By 4 p.m. ET, a decline of 207 points or 0.5% was observed, with the index plummeting by 0.6%.
Powell emphasized a cautious approach for potential rate cuts
On Thursday, Jerome Powell, the Federal Reserve Chairman, stated that the current economic situation did not necessitate an immediate reduction of rates. He attributed this to the economic strength, which allows the Federal Reserve to carefully consider monetary policy decisions.
He commented, “The ongoing strength of our economy doesn’t necessitate us to rush in reducing the rates. This strength allows us to take a more careful stance in our decision-making process.”
The 2-year Treasury yield, which is rate-sensitive, jumped 6 basis points, reaching 4.34%.
The probability of a rate cut in December dropped from 80% to 60%, as per the data from Investing.com
Emerging signs of stronger inflation
Data released on Thursday indicated that the US producer prices rose at a swifter annual rate than anticipated in October. They were up by 2.4% compared to the previous year, which is an increase from 1.9% in September and higher than the estimated 2.3%.
Excluding volatile factors such as food and fuel, the reading was 0.3% month-on-month, which matched the estimates. The “core” index also rose by 3.1% year-over-year, slightly above the expected 3.0%.
Kyle Chapman, FX Markets Analyst at Ballinger Group, said, “The PPI report supports the CPI in terms of a decline in the underlying inflationary pressures. However, the soft outlook for core PCE is likely to keep the Fed on track for another rate cut in December.”
Disney and Cisco’s Q4 performance
Walt Disney’s stock rose by 6% following the announcement of better-than-expected income and revenue for Q4. The strong performance of their key streaming business contributed to a 14% rise in revenue.
On the other hand, Cisco Systems’ stock fell by 2% after the company reported a decline in revenue for the fourth consecutive quarter and a lukewarm full-year outlook.
Advanced Micro Devices’ stock also saw a slight decrease after the chipmaker announced layoffs of 4% of its global workforce, approximately 1,000 positions.
In other news, Tapestry’s stock rose by 13% while Capri’s stock increased by 4% after their merger was canceled due to the Federal Trade Commission blocking the deal.
