[New York Stock Market] Powell's 'Hawkish Remarks' Lead to Broad Decline... "No Signal to Rush Rate Cuts"

Trump Rally Pauses as Powell's Remarks Pour Cold Water
Powell Says "US Economy is Strongest"... Signals Slower Monetary Easing
US 2-Year Treasury Yield Rises... December Small Cut Outlook Falls
Trump Considers Repealing IRA... Tesla Down 5.77%
October Retail Sales Released on 15th in Focus

The three major indices of the U.S. New York Stock Exchange all closed lower on the 14th (local time). The 'Trump rally' that had continued after the presidential election entered a lull, and in the afternoon, Federal Reserve (Fed) Chairman Jerome Powell hinted at slowing the pace of interest rate cuts, causing investor sentiment to freeze sharply.

On this day in the New York stock market, the blue-chip-focused Dow Jones Industrial Average closed at 43,750.86, down 207.33 points (0.47%) from the previous trading day. The large-cap-focused S&P 500 index fell 36.21 points (0.6%) to 5,949.17, and the tech-heavy Nasdaq index dropped 123.07 points (0.64%) to close at 19,107.65.

The market slid after Chairman Powell indicated a slowdown in the monetary easing policy initiated in September. At an event held in Dallas that day, he said, "The U.S. economy is by far the best among major economies worldwide," and added, "The economy is not sending any signals that we need to rush rate cuts." He emphasized, "The strong economy we are currently seeing gives us the ability to make careful decisions." Inflation is broadly progressing, and the labor market remains stronger than expected, leading to an assessment that the need for rate cuts is not urgent. Additionally, the possibility of 'Trumflation' (inflation caused by Trump’s policies) expected during the implementation of President-elect Donald Trump's tariff hikes and tax cuts may have been a factor in deciding to slow the pace of rate cuts.

Following Powell's remarks, Wall Street's expectations for Fed rate cuts next month have rapidly diminished. According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market reflected a 62.6% probability that the Fed would cut rates by 0.25 percentage points at the December Federal Open Market Committee (FOMC) regular meeting. Earlier that morning, the probability was around 80%, but it dropped to the low 60% range after Powell's comments. As market expectations for rate cuts retreat, U.S. Treasury yields are rising, especially in the short-term sector. The 2-year U.S. Treasury yield, sensitive to monetary policy, is currently at 4.35%, up 6 basis points (1bp = 0.01 percentage points) from the previous trading day. The 10-year U.S. Treasury yield, a global bond yield benchmark, is hovering around 4.45%, unchanged from the previous day.

Quincy Crosby, Chief Global Strategist at LPL Financial, evaluated, "It was expected that the final stage of price stabilization could be challenging, but Chairman Powell reminded us again that the Fed will not implement the series of rate cuts the market desires unless the labor market deteriorates."

The wholesale price index released that morning showed a slight increase but met market expectations. According to the U.S. Department of Labor, the Producer Price Index (PPI) for October rose 0.2% month-over-month. This was a slight increase from September's 0.1% but matched the expert forecast of 0.2%. The October PPI rose 2.4% on an annualized basis over the past 12 months, a significant increase from September's 1.9%. The wholesale price PPI is considered a leading indicator of the Consumer Price Index (CPI), which affects retail prices with a time lag. The CPI for October, released the previous day, showed a 2.6% increase year-over-year. Although housing and food prices rose, pushing the figure up 0.2 percentage points from September's 2.4%, it also met market expectations.

Short-term employment indicators appeared robust. According to the U.S. Department of Labor, initial jobless claims for the week of November 3-9 decreased by 4,000 from the previous week's revised figure to 217,000. This is the lowest level since May and 7,000 below the expert forecast of 224,000. Continuing claims for unemployment benefits, which count those claiming benefits for at least two weeks, stood at 1,873,000 for the week of October 27 to November 2, also below the previous week's revised figure of 1,884,000 and the market forecast of 1,880,000.

The market is searching for new upward momentum as the Trump rally has paused. Courtney Garcia, Senior Advisor at Payne Capital Management, said, "I don't think the rally will end in the short term," adding, "If there is new capital, there are still many opportunity areas with room to run."

Investors' attention is turning to the October retail sales data to be released on the 15th. The market expects October retail sales to have increased by 0.3% month-over-month, slightly slowing from September's 0.4%.

By individual stocks, Tesla fell 5.77%. Investors sold shares after reports emerged that President-elect Trump's transition team is discussing eliminating the benefit of up to $7,500 subsidies for electric vehicle purchases under the Inflation Reduction Act (IRA). Walt Disney, which announced better-than-expected fourth-quarter fiscal results, rose 6.29%. Apple increased by 1.38%, and AI leader Nvidia rose 0.33%.

International oil prices rose. West Texas Intermediate (WTI) crude oil closed at $68.70 per barrel, up $0.27 (0.4%) from the previous trading day, and Brent crude, the global oil price benchmark, closed at $72.56 per barrel, up $0.28 (0.4%).