US equity indexes closed mixed following signals from Federal Reserve Chair Jerome Powell that economic robustness might temper the speed at which the central bank intends to ease policies. The Dow Jones Industrial Average ended at 43,444.99 on Friday, down from 43,988.99 a week prior. The S&P 500 stood at 5,870.62 by the end of trading, compared to 5,995.54 the previous week.
The Nasdaq Composite closed at 18,680.12, slightly up from 18,286.78 a week earlier. The financials sector led the market this week, while healthcare lagged behind. On Thursday, Powell indicated that the US economy “is not sending any signals that we need to be in a hurry” to ease monetary policies, following October's producer price index data released that same day, which demonstrated sequential acceleration.
Additionally, consumer price inflation for the same month rose in line with market expectations. On Friday, US retail sales increased by 0.4% in October, surpassing the anticipated 0.3% rise as indicated by a survey compiled by Bloomberg. This was a positive change compared to the previous month’s 0.8% increase. Powell’s remarks, coupled with the retail sales figures, influenced a reduction in the likelihood of the Federal Open Market Committee reducing interest rates by 25 basis points in December, decreasing it to 62% from 72% a day earlier.
The remaining probability reflects a pause in the easing cycle that began in September, based on the CME Group's FedWatch Tool analysis late on Friday. “At the very least, policy is not on a predetermined path, and while changing conditions likely warrant a further reduction in policy firming back towards neutral, we anticipate a very slow and tempered pace of Fed action,” Stifel noted on Friday. Meanwhile, expectations of robust domestic growth, persistent inflationary pressures, and concerns over a bloated government balance sheet are likely to reshape anticipations for higher long-term rates, resulting in a more traditionally shaped yield curve as we look toward the new year, Stifel’s report added..