Stock market news/ S&P 500 struggles/ Federal Reserve rate cuts/ Nike earnings/ inflation update/ bond market yields/ Newslooks/ J. Mansour/ Morning Edition/ U.S. stocks struggled Friday, with the S&P 500 dipping 0.1% and the Nasdaq losing 0.5% as Wall Street reeled from the Federal Reserve’s tempered rate-cut outlook. The Dow Jones rose slightly by 0.1%. Investors remain cautious after Congress rejected President-elect Donald Trump’s funding plan, adding uncertainty to markets already grappling with inflation and economic challenges.
Wall Street Drifts to Close a Difficult Week: Quick Looks
- Market Movement: S&P 500 slipped 0.1%, Nasdaq fell 0.5%, Dow Jones rose 0.1%.
- Rate Cuts Uncertainty: Federal Reserve projected fewer rate cuts in 2025, impacting investor sentiment.
- Inflation Data: A key inflation measure was slightly lower than expected, offering modest relief.
- Corporate Earnings: Nike shares steadied after initial losses; FedEx climbed 3.1% following strong results.
- Bond Market: Treasury yields fell, with the 10-year yield dipping to 4.50% from 4.57%.
Wall Street Slips as Stocks Close Out a Tough Week
Deep Look
Wall Street Ends Challenging Week Amid Inflation Concerns and Political Uncertainty
Wall Street struggled to regain footing Friday, closing out one of its roughest weeks of 2024. The S&P 500 edged down 0.1%, the Nasdaq composite dropped 0.5%, while the Dow Jones Industrial Average gained 0.1%.
Federal Reserve’s Outlook Weighs on Markets
The Federal Reserve’s announcement earlier this week that it might cut interest rates fewer times than expected in 2025 continued to ripple across financial markets. The Fed cited stubborn inflation and economic resilience as reasons to proceed cautiously, dampening hopes for more aggressive rate reductions that typically bolster investment prices.
According to Brian Jacobsen, chief economist at Annex Wealth Management, “When optimism is rising and market multiples are expanding, it just takes a little fear to take the veneer off a market rally.”
Traders had largely priced in multiple rate cuts for 2025 but are now bracing for just one or two, with the possibility of none.
Political Turmoil Adds to Investor Anxiety
President-elect Donald Trump’s government funding plan was decisively rejected by the House of Representatives on Thursday, raising concerns about potential gridlock even with Republicans controlling the House, Senate, and White House.
The market has already erased much of its post-election rally, which had been fueled by expectations of economic growth and deregulation under Trump. However, fears about inflation, ballooning U.S. debt, and potential trade disruptions under the incoming administration are tempering enthusiasm.
Carl B. Weinberg of High Frequency Economics summed up the sentiment: “Next year will be a time of huge challenges to the world economy. We do not look forward to these changes.”
Earnings Reports Offer Mixed Signals
Corporate earnings provided a mixed bag of results for investors.
- Nike: Shares of the athletic giant initially dipped but rebounded 0.5% after reporting stronger-than-expected profits. CEO Elliott Hill’s strategic pivots, including pricing adjustments and warehouse management, are expected to impact short-term results but drive long-term growth.
- FedEx: The delivery company rose 3.1% after exceeding profit expectations and announcing plans to spin off its freight business.
- U.S. Steel: Shares fell 2.6% after the company warned of weaker-than-expected fourth-quarter results due to persistently low steel prices.
Inflation Data Offers Modest Relief
A government report released Friday showed that the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose slightly less than expected in November. While this data provides a glimmer of hope, overall inflation remains above the Fed’s 2% target, keeping the central bank cautious.
Bond Market Reaction
Treasury yields dipped, with the 10-year yield falling to 4.50% from 4.57% on Thursday. Despite the decline, yields remain elevated for the week as investors digest the Fed’s messaging on maintaining higher interest rates for longer.
Global Market Performance
Indexes across Asia and Europe also fell, reflecting widespread uncertainty and cautious sentiment among investors worldwide.
Key Takeaways
- Market Movement: U.S. stocks struggled as rate cut optimism waned.
- Fed’s Impact: Fewer rate cuts are expected in 2025, weighing on investor sentiment.
- Corporate Results: Nike and FedEx showed strength; U.S. Steel faltered.
- Inflation: Modest cooling in inflation provided some relief.
- Political Uncertainty: Congress’s rejection of Trump’s funding plan added to market jitters.
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