U.S. equity indexes experienced a downturn on Friday as expectations for an interest-rate cut in December diminished, influenced by unexpectedly strong retail sales that supported Federal Reserve Chair Jerome Powell's recent remarks focusing on the pace of monetary policy adjustments. The S&P 500 fell 1.4% to 5,864.1, while the Dow Jones Industrial Average decreased by 0.9% to 43,360.2, and the Nasdaq Composite dropped 2.4% to 18,648.6.
The technology, health care, and communication services sectors were the biggest losers of the day, whereas utilities emerged as the top performers. The likelihood of the Federal Open Market Committee enacting a 25 basis point interest rate cut in December dropped to 62% from 72% the previous day, as indicated by the CME Group's FedWatch Tool.
The remaining probability suggests a pause in the easing cycle initiated in September. In his statements on Thursday, Powell emphasized that the U.S. economy is ‘not sending any signals that we need to be in a hurry’ to relax monetary policy, which coincided with data indicating sequential acceleration in producer price growth released on the same day.
Earlier in the week, consumer price inflation data from the Bureau of Labor Statistics aligned with market expectations, indicating stability for the month. Recent economic news highlighted a 0.4% increase in U.S. retail sales for October, surpassing the expected 0.3% gain according to a Bloomberg survey, following a robust increase of 0.8% in the previous month. Conversely, U.S.
industrial production dipped by 0.3% in October, contrasting with the projected 0.4% decrease. The Federal Reserve noted that 'A strike at a major producer of civilian aircraft held down total industrial production growth by an estimated 0.3 percentage points in September and 0.2 percentage points in October.' Furthermore, ‘Hurricane Milton and the lingering effects of Hurricane Helene together reduced October industrial production growth by 0.1 percentage point.’ The New York Federal Reserve's Empire State manufacturing index improved to 31.2 in November after sinking to minus 11.9 in October, whereas a stable reading was anticipated from the Bloomberg survey.
This index serves as an early indicator for the manufacturing sector’s performance in November, suggesting a rebound. Most U.S. Treasury yields experienced an intraday increase, with the 10-year yield rising by one basis point to 4.43%. In corporate developments, shares of Applied Materials ($AMAT) plummeted nearly 9% intraday, becoming the most significant decliner on both S&P 500 and Nasdaq after the company announced a decline in fiscal Q4 GAAP earnings, failing to meet consensus expectations.
The price of West Texas Intermediate crude oil fell 2.4% to $67.06 a barrel. Precious metals also faced declines, with gold decreasing 0.3% to $2,566.01 an ounce and silver slipping 0.7% to $30.37 an ounce..