US equities retreat as Powell dampens Fed Sept cut hopes
ADVERTISEMENT In keeping rates unchanged, as was widely expected, the central bank said "the unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated," in a split decision that saw two governors dissent.
Stocks were modestly higher before the Fed statement as investors assessed the first reading of second-quarter economic growth, which was stronger than expected, but underlying details indicated an economy that was likely losing strength.
However, stocks retreated after Powell said it was too soon to say whether the Fed would cut rates at its next meeting in September and noted that current policy was modestly restrictive but has not been holding back the economy. "There wasn't too much of a change in the statement here, still showing concerns about how these tariff policies will come through and probably yet to rely on the data that's come through, you can see that just in the GDP report, how much noise is going on in each of these releases right now," said JP Powers, chief investment officer at RWA Wealth Partners in Boston. "If I were Powell, I don't know how much he thinks about his legacy, but I think he's going to err on the side of probably being too late to cut rates here on his way out rather than risk any flare-up just as he's heading off into the sunset."
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The Dow Jones Industrial Average fell 171.71 points, or 0.38%, to 44,461.28, the S&P 500 lost 7.96 points, or 0.12%, to 6,362.90 and the Nasdaq Composite gained 31.38 points, or 0.15%, to 21,129.67. The S&P had risen as much as 0.4% on the session before fading.
After market expectations for a September rate cut climbed to about 68% following the Fed statement, they fell below 50% in the wake of Powell's comments, according to the LSEG data.
ADVERTISEMENT Earlier data in the ADP employment report showed private payrolls grew by 104,000 in July, topping forecasts of 75,000, the latest in a string of labor market data this week before Friday's government payrolls report.
Megacap companies Microsoft and Meta Platforms were both up more than 6% in extended trade after reporting quarterly results while investors were still awaiting earnings from Amazon and Apple on Thursday. The recent batch of corporate earnings initially helped buoy equities, with Teradyne surging 18.9% as one of the best performers on the S&P 500 after its quarterly results.
ADVERTISEMENT Solid earnings from a host of consumer-facing names also put the resilience of shoppers on display. Starbucks posted better-than-expected third-quarter sales, although its shares edged down 0.2%, while Hershey gained 1.4% after the chocolate and snacks company reported results that topped forecasts. VF Corp, parent of Vans, beat quarterly revenue estimates and closed up 2.6%.
ADVERTISEMENT Still, the tariff overhang remained, as President Donald Trump said the U.S. would impose a 50% tariff on copper pipes and wiring, although that fell short of the more draconian measures expected, and excluded copper input materials such as ores, concentrates and cathodes. The tariff weighed heavily on the S&P 500 materials sector, which fell 2%, as Freeport-McMoRan shares tumbled 9.5%. Declining issues outnumbered advancers by a 2.52-to-1 ratio on the NYSE, while advancing issues outnumbered decliners by a 2.05-to-1 ratio on the Nasdaq. The S&P 500 posted 31 new 52-week highs and 15 new lows, while the Nasdaq Composite recorded 73 new highs and 104 new lows.
Volume on U.S. exchanges was 17.66 billion shares, compared with the 17.87 billion average for the full session over the last 20 trading days.
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