Stocks Plunge as Fed Comments Shake Up December Rate-Cut Predictions!

Stock Market Reacts to Powell’s Comments

Investors faced a rude awakening as stock indexes took a downturn, grappling with the aftermath of Federal Reserve Chair Jerome Powell’s recent statements. The anticipation of a 25-basis-point rate cut in December plummeted following Powell’s address, sending shockwaves through the market. Alongside this, bond yields surged, reflecting the underlying signs of economic vitality.

Key Points Regarding Powell’s Comments:

1. Powell’s Messages Impacting the Market:

In a surprising turn of events, US equities stumbled on Friday morning as Wall Street recalibrated its rate-cut expectations for December. The market retreat commenced post Powell’s reassurance that the central bank intends to tread cautiously when adjusting its policies. Expressing confidence in the current economic robustness, Powell remarked, “The economy is not sending any signals that we need to be in a hurry to lower rates.”

1. Rate-Cut Probabilities and Economic Data:

Following Powell’s statements, the likelihood of a 25-basis-point rate cut dipped below 60%, a stark decline from the prior estimation of 80% provided by the CME FedWatch Tool. This decrease persisted throughout Friday morning, hovering around 58%. Bolstering this hesitation in rate-cut expectations is the string of positive economic data released recently. Notably, the latest figures unveiled a surge in US retail sales for October, primarily driven by increased auto purchases.

Concluding Market Trends:

Despite the temporary setback experienced by the major indexes, bond yields continued their upward trajectory. The 2-year yield, particularly sensitive to immediate rate projections, registered a notable 7 basis points hike over the past two days. The general sentiment in the market, reflective of shifting rate-cut expectations and promising economic indicators, stirred a sense of uncertainty among investors.

Market Overview:

Here’s a snapshot of key market movements:

• Oil markets witnessed a decline, with West Texas Intermediate crude falling by 0.96% to $68.04 a barrel, and Brent crude, the global benchmark, sliding by 0.94% to $71.88 a barrel.
• Gold prices remained relatively stable at $2,572 an ounce.
• The 10-year Treasury yield observed a 4 basis points increase, reaching 4.459%.
• Bitcoin, the volatile cryptocurrency, recorded an impressive 2.28% jump, climbing to $90,053.

In conclusion, Powell’s comments reverberated throughout the financial landscape, prompting a reassessment of rate-cut expectations and underscoring the delicate balance between economic growth and policy adjustments. Stay tuned for further developments and market shifts as investors navigate this ever-evolving terrain.