Wall Street loses ground after Powell urges caution on rate cuts

Wall Street’s main indexes fell on Friday after Federal Reserve Chair Jerome Powell said there was no need to rush interest rate cuts, pushing up U.S. Treasury yields and pressuring equities. Powell pointed to ongoing economic growth, a solid job market, and inflation above the Fed’s 2% target as reasons the central bank can afford to be careful as they determine the pace and scope of rate cuts going forward. Retail sales rose 0.4% in October, but underlying momentum in consumer spending appeared to slow at the start of the fourth quarter.

Traders increased bets that the Fed will keep rates on hold at its December meeting, pricing in a 41.3% chance, compared with 14% a month ago, according to the CME FedWatch tool. The retail sales number was overall pretty good, which is exactly what Powell was talking about yesterday, where if the economy continues to be reasonably strong and inflation is approaching our target, they can afford to be patient and go slower with rate cuts than previously thought.

All three major U.S. stock indexes were headed for weekly losses as a sharp post-election rally fizzled out and market focus shifted to the state of the economy and potential inflation risks under a new administration. Stocks of vaccine makers dipped after the President-elect selected Robert F Kennedy Jr., who has spread misinformation on vaccines, to head the Department of Health and Human Services. BioNTech dropped 5%, while Moderna and Novavax fell more than 4%. Pfizer dipped 4.9%.

Warren Buffett’s Berkshire Hathaway made new investments in Domino’s Pizza and sold its entire stake in Ulta Beauty. Domino’s shares were up 2%, while Ulta was down 2.5%. Advancers outnumbered decliners by a 1.06-to-1 ratio on the NYSE and by a 1.5-to-1 ratio on the Nasdaq.