The S&P 500 slipped on Thursday after Federal Reserve Chair Jerome Powell indicated that the central bank might take a cautious approach to future rate cuts, citing ongoing economic strength as a reason not to rush policy easing.
As of 4:00 p.m. ET (21:00 GMT), the Dow Jones Industrial Average dropped by 207 points, or 0.5%, the S&P 500 fell 0.6%, and the NASDAQ Composite also declined 0.6%.
Powell Highlights Cautious Path for Rate Cuts
In his speech on Thursday, Powell noted that the current economic environment does not warrant an urgent reduction in rates, allowing the Fed to proceed carefully in its monetary policy decisions. “The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully,” Powell stated.
Following Powell’s comments, the rate sensitive 2-year Treasury yield climbed 6 basis points to 4.34%. Meanwhile, the probability of a December rate cut fell from 80% to 60%, according to Investing.com’s Fed Rate Monitor Tool.
Inflation Data Signals Stronger Price Pressures
New data on Thursday showed U.S. producer prices rose at a faster annual pace than expected in October, climbing 2.4% year over year, compared to 1.9% in September and surpassing economist estimates of 2.3%. On a monthly basis, the increase was 0.2%, in line with projections and up from a revised 0.1% in September.
Excluding volatile items like food and energy, the core index rose 0.3% month over month, meeting expectations, and 3.1% year over year, slightly above the projected 3.0%. These figures follow Wednesday’s consumer price data, where core inflation held steady above 3%.
“The PPI report aligns with CPI data, indicating some progress on inflation pressures but at a slower pace. Nonetheless, core PCE is soft enough to keep a December rate cut on the table,” said Kyle Chapman, FX Markets Analyst at Ballinger Group.
Corporate Highlights: Disney, Cisco, and More
Disney (NYSE) stock surged 6% after the company reported stronger than expected revenue and profit for Q4, largely driven by its streaming business, which contributed to a 14% revenue increase.
Cisco Systems (NASDAQ) shares dropped 2% after the company announced a muted full-year outlook and reported a fourth consecutive quarter of declining revenue.
Advanced Micro Devices (NASDAQ) stock closed slightly down as the chipmaker announced plans to lay off around 1,000 employees, equating to about 4% of its global workforce.
Elsewhere, Tapestry (NYSE) shares rose 13% while Capri Holdings (NYSE) shares gained over 4% after the two luxury fashion companies terminated their merger following the Federal Trade Commission’s intervention.
