4:15pm: Powell cites economic strength for rate caution
Stocks declined on Thursday as the post-election rally lost momentum, with investors reacting to Federal Reserve Chair Jerome Powell's comments indicating no urgency to lower interest rates.
The Dow Jones fell by 0.5%, or over 200 points, to close at 43,751. The S&P 500 dropped 0.6%, ending the day at 5,949 and the Nasdaq slid 0.6% to finish at 19,108.
Speaking in Dallas, Fed chair Powell cited the economy's resilience as a reason for the Fed's cautious approach to rate cuts, stressing that the central bank will monitor inflation closely to ensure it stays within acceptable limits.
While inflation is nearing the Fed’s 2% target, Powell noted the importance of observing core inflation metrics, especially in goods and services, which have decreased over the last two years.
3:40pm: Dollar reaches inflection point
Following Election Day, the US Dollar Index surged to new highs, driven by rising yields and optimism about domestic growth and inflation.
Markets are adjusting expectations for Federal Reserve rate cuts, with futures pricing in three 0.25% cuts by the end of next year. Fed Chair Jerome Powell highlighted the U.S. economy’s resilience, noting strong growth, a robust labor market, and easing inflation compared to global peers.
"Powell’s latter point of relative outperformance has been a big driver of capital flows into the dollar, especially when you compare the U.S. economy to Europe — the euro currency is the biggest weight (58%) within the U.S. Dollar Index," LPL's Adam Turnquist wrote.
"The potential for fewer cuts from the Fed and a more dovish ECB has been a big factor behind the dollar’s advance over the last few months."
2:10pm: Gold prices stabilize
Gold has managed to rally off its lows, said IG's Chris Beauchamp.
Prices seem to have stabilized, but it is "far from clear" that the correction has run its course, the analyst added.
"After the unstoppable rally of the past few months the drop from $2800 has helped to take some froth out of the market, and like European stocks there will be hopes of a new leg higher in this, one of 2024’s solid performers," Beauchamp wrote.
12:40pm: Markets tread water
Stocks were largely unchanged by midday as investors awaited Federal Reserve Chair Jerome Powell's comments on potential interest rate cuts and considered the implications of a Republican political sweep.
Just after noon, the Dow was down 0.2% and the S&P 500 and Nasdaq were both down 0.3%, as investors kept a close watch on inflation trends and the likelihood of rates staying elevated longer.
Disney shares surged over 10% early Thursday, bolstered by strong earnings that surpassed Wall Street expectations and a profitable direct-to-consumer segment. By afternoon, the stock’s gains settled around 7%.
Tesla, meanwhile, fell over 2% after a post-election rally, with shares retreating to around $320, still up nearly 15% from immediately after Donald Trump's election victory.
11:25pm: Another "uncomfortably firm" inflation print
Bank of America expects core PCE inflation to rise by 0.3% month-over-month (m/m) in October, with an annual increase of 2.8%, up from 2.7% largely due to base effects.
While inflation has slowed, it remains above the Fed's 2% target.Headline inflation is expected to be cooler, with a 0.2% m/m increase, pushing the year-over-year rate to 2.3%.
Despite the elevated core PCE numbers, Bank of America advises against market panic, attributing some of the higher inflation readings to temporary factors like financial services and airfare costs. Inflation expectations and wage trends also support further disinflation. However, persistent inflation above target may prompt the Fed to reassess its policy outlook.
While Bank of America still anticipates a 25-basis-point rate cut in December, they note a possible shift toward a slower rate-cutting path due to resilient economic activity and stubborn inflation.
9.50am: Russell 2000 and Nasdaq open lower
Wall Street has started in the red, though the moves are mostly small.
Going against predictions on the futures market, the Russell 2000 has dropped 0.6% to lead the retreat, while the Nasdaq Composite is down 0.3%.
The S&P 500 has dropped 0.2% and the Dow Jones 0.1%.
Tesla Inc (NASDAQ:TSLA) is one of the notable fallers, down 1% as investors take profits after the post-election surge, while Alphabet and Meta are both also down around 0.5%.
Super Micro Computer Inc (NASDAQ:SMCI) continues to plunge, falling another 9% a day after it announced another delay in filing required financial reports, raising concerns about potential delisting from the Nasdaq exchange.
Disney is the top riser on the S&P, up 11% on the back of its bumper earnings update, boosted by the Deadpool & Wolverine movie.
Tapestry also climbed 7% as its merger with Capri was called off and it announced a new $2 billion share buyback.
CEO Joanne Crevoiserat says the decision today "clarifies the forward strategy" and following a successful first quarter, "we will move with speed and boldness to accelerate growth for our organic business".
7.50am: Stocks set for mixed start, Russell higher, Nasdaq lower
US stocks are set for a mixed but mostly higher open on Thursday, as the dollar adds to its post-election gains and investors look ahead to a speech from Federal Reserve chair Jerome Powell later.
Futures for the main Wall Street indexes are modestly higher, led by the Russell 2000, up 0.4% as the Trumpian rally in small-caps continues.
While Nasdaq 100 futures are down 0.1%, S&P 500 are up 0.1% and Dow Jones futures are up 0.2%.
The dollar, meanwhile, has extended its charge higher, up another 0.3% versus the pound and the euro, after Donald Trump and the Republican party’s clean sweep was announced, taking control of not just the White House but also the Senate and House of Representatives.
DXY, the dollar index, is up above 107 points, levels last sustained in late 2022.
Among companies, Walt Disney Co (NYSE:DIS, ETR:WDP) shares are up 8% pre-market as Deadpool & Wolverine helped the entertainment monolith deliver better-than-expect full-year financial results.
Tapestry Inc (NYSE:TPR) is up 7% after suitor Capri confirmed the mutual termination of the pair's merger agreement, saying this "was in the best interests" of both companies as receiving necessary US regulatory approvals was "unlikely".