U.S. stock index futures declined on Friday after Federal Reserve Chair Jerome Powell stated there was no urgency to reduce interest rates, driving up bond yields and putting pressure on rate-sensitive stocks.
In a Thursday speech, Powell highlighted steady economic growth, a strong labor market, and inflation above the Fed’s 2% target as reasons for the central bank’s cautious approach in determining the timing and extent of future rate cuts.
U.S. Treasury yields rose broadly following Powell’s remarks, while Wall Street’s major indexes ended Thursday in negative territory.
“Fed Chair Powell delivered news the markets didn’t want to hear, but it was evident from the latest CPI report: the Fed cannot yet claim victory in its fight against inflation,” said Quincy Krosby, Chief Global Strategist at LPL Financial.
Traders increased expectations that the Fed will hold rates steady in December, with the CME FedWatch tool showing a 37.6% probability, up from 14% a month ago. Projections now indicate only around 73 basis points of rate cuts by the end of 2025, according to LSEG data.
The three major U.S. stock indexes are on track for weekly losses as a sharp post-election rally fades, with market attention turning to economic conditions and potential inflation risks under a prospective second term for Donald Trump.
Vaccine maker stocks declined after President-elect Robert F. Kennedy Jr., known for spreading vaccine misinformation, was selected to lead the Department of Health and Human Services. BioNTech, Moderna, and Novavax fell over 2% in premarket trading, while Pfizer dipped 0.4%.
By 5:30 a.m. ET, Dow E-minis had dropped 205 points (0.47%), S&P 500 E-minis fell 38.5 points (0.64%), and Nasdaq 100 E-minis declined 185.5 points (0.88%). Futures for the small-cap, rate-sensitive Russell 2000 index fell 0.3%.
Mega-cap stocks also faced losses, with Nvidia slipping 0.5%, Apple falling 1%, and Alphabet down 0.6%.
Powell’s comments came after recent consumer and producer price data pointed to persistent inflation.
Friday’s October retail sales report, due at 8:30 a.m. ET, will offer further insight into how consumers are managing higher prices. Additional data on import/export prices, industrial production, and remarks from New York Fed President John Williams are also expected later in the day.
