Quoted from The Wall Street Journal:
Stronger than expected economic indicators dash hopes for aggressive Fed action
Jan. 17, 2024 4:45 pm ET
U.S. stock indexes fell deeper into negative territory for 2024 as investors dialed back their expectations for how quickly the Federal Reserve might start cutting interest rates.
Retail sales rose a seasonally adjusted 0.6% in December from a month earlier, according to data released on Wednesday, a larger increase than economists expected. The sign of economic strength could lessen the chance that central bank officials will cut interest rates as much as markets had previously expected, some investors said.
“The hopes are waning that we’re going to see aggressive rate cuts,” said Dan Genter, chief executive and chief investment officer at Genter Capital Management. “People were talking about six rate cuts during the year. The numbers aren’t there to really justify it.”
The S&P 500 fell 0.6% while the Dow Jones Industrial Average slipped 0.3%, or about 94 points. The tech-heavy Nasdaq Composite declined 0.6%. The S&P 500 is down 0.6% in 2024, while the Dow and Nasdaq are off 1.1% and 1%, respectively.
The yield on the benchmark 10-year U.S. Treasury note, meanwhile, rose to 4.103%, its highest 3 p.m. level in more than a month, from 4.064% on Tuesday.
Higher yields tend to weigh on stock prices. They give investors options for earning returns at a lower risk than in the stock market. They also reduce the worth of companies’ future cash flows in calculations that are commonly used to determine the value of a stock.
The declines were broad-based, with all 11 sectors of the S&P 500 trading lower. All but one of the so-called Magnificent Seven tech stocks retreated, with
shares falling 2%,
shares dropping 0.9% and Class A shares of Google parent
losing 0.7%. Shares of
added 0.2%.
Traders on Wednesday lowered the probability they assigned to the Fed’s having cut interest rates from current levels by its March meeting, according to CME Group’s FedWatch tool.
Fed governor Christopher Waller said Tuesday that a continued decline in inflation would allow the central bank to cut interest rates this year. But as long as labor markets and economic activity are solid, he saw “no reason to move as quickly or cut as rapidly” as in previous rate-cutting cycles.
“You can drive a truck through the spread between what the market expects and what the Fed is telegraphing,” said Hans Olsen, chief investment officer at Fiduciary Trust, an asset management firm and private bank based in Boston. “The data is suggesting that perhaps the Fed is more right than the market.”
What are the largest banks on Wall Street expecting for the stock market and the U.S. economy in 2024? WSJ’s Dion Rabouin digs into predictions from firms like Deutsche Bank, Citi, JPMorgan and Wells Fargo to explain what they see on the horizon. Photo illustration: Carlo Allegri/Reuters/Storyblocks
Among individual stocks, shares of
slumped 22%, after a 47% decline Tuesday. A federal judge blocked a plan by
to buy Spirit for $3.8 billion.
Investors turned to the safety of some traditionally defensive stocks, including food makers and healthcare companies.
shares rose 2%,
gained 1.3% and
added 2%.
Overseas, the Stoxx Europe 600 fell 1.1%. In Asia, Hong Kong’s Hang Seng Index dropped 3.7% to its lowest closing value since October 2022 after weak economic data in China.