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More than half of Trump’s post-election stock market rally has been erased.
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The turning point came on Thursday, when Federal Reserve Chair Powell said the central bank will take its time cutting rates.
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That, coupled with a streak of strong economic data, has investors wondering whether a cut is necessary in December.
And just like that, half of Trump’s euphoric post-election stock market gain has vanished.
Major US indices saw heavy selling on Friday, with the tech-heavy Nasdaq leading the way, 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 on Thursday, when Federal Reserve Chair Jerome Powell said he and the central bank are in no rush to cut rates, given the positive signals the economy is sending.
Stocks fell in afternoon trading and that pressure continued into Friday. The S&P 500 fell as much as 1.6% and has now lost more than half of its torrid 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 fell 3.2%.
The losses have come as the odds of a 25 basis point rate cut in December have fallen. Investors are now pricing in a 58% chance of one at the next meeting, up from around 80% before Powell’s speech, according to the CME FedWatch tool.
The central bank chief’s comments come amid a promising run of US economic data. On Friday, retail sales data showed signs of strength, and on Thursday, jobless claims numbers were surprisingly low.
Stock investors have been grappling with what Trump will ultimately mean for the market now that the dust is settling on a race to buy it all. Concerns have been raised about whether Trump’s protectionist trade policies will increase inflation, possibly requiring eventual rate increases.
Until now, investors seemed content to focus on Trump’s plan to cut taxes and deregulate. But now it looks like Jerome Powell has given them something else to think (and worry about).
Here’s where the US indices were at the 4pm close on Friday:
Here’s what else is happening: