US stocks drop as expectations of a Fed rate cut cool

WASHINGTON – US stocks fell on Nov 14, as traders digested an uptick in inflation and comments from Fed chairman Jerome Powell, which had the effect of cooling expectations of a December rate cut.

Consumer and producer inflation data published this week point to a small rise in the rate of price increases, complicating the Fed’s rate-cutting plans.

Concerns that the Fed may be more cautious in its last meeting of the year were magnified by comments from Mr Powell, who told a conference in Texas that the path of rate cuts “is not preset.”

“The economy is not sending any signals that we need to be in a hurry to lower rates,” he added.

The Dow Jones Industrial Average closed down 0.5 per cent at 43,750.86, while the broad-based S&P 500 retreated 0.6 per cent to 5,949.17.

The tech-heavy Nasdaq Composite Index also slipped, falling 0.6 per cent to 19,107.65.

“The inflation data this week and the Fed Chair Powell’s comments today have pushed down the expectations of a rate cut in December,” Ventura Wealth Management chief investment officer Tom Cahill told AFP. “That’s what’s troubling the market.”

“It was an overbought market so it certainly does not have a catalyst to go higher today,” he added.

Futures traders have pared back their expectations of a quarter point rate cut in December from more than 80 per cent on Nov 13 to less than 60 per cent on Nov 14, according to CME Group data.

Among individual firms, electric vehicle (EV) manufacturers Rivian and Tesla saw their share prices plummet 14.3 per cent and 5.8 per cent respectively on media reports that President-elect Donald Trump could scrap a popular US$7,500 (S$10,000) consumer tax credit for EV purchases.