Stocks Falling with Decreased Optimism on Fed Slowdown

Hawkish Comments from Federal Reserve Officials and Economic Data Overrule Prior Optimism of Traders

Investor enthusiasm for a possible moderation in interest-rate rises waned on Thursday, sending stocks down. In morning trading, the S&P 500 dropped by almost a point. Wednesday’s loss of points by the benchmark gauge was offset by stock gains last week. The Dow Jones Industrial Average and the Nasdaq Composite Index both fell. In November, all three indexes were positive. 

When inflation figures slowed last week, equities surged higher, signaling that the Federal Reserve might scale back its pace of interest-rate increases. Fed officials have refuted that assertion. Recent strong economic numbers have raised worry about whether the Fed will keep increasing rates for an extended period to combat inflation.

According to Louis Fed President James Bullard, interest rates must climb much higher to restrict the economy to the degree that deflation returns to the Fed’s goal. Bullard didn’t specify a number, but a graph alongside his words suggested the Fed’s policy rate might range between 5% and 7%.

Stocks Also Succumb to Pessimistic Corporate and Economic Data

The sentiment was not lifted by tech and consumer-facing firm earnings beats. Nvidia topped analysts’ forecasts with their quarterly sales posting. Cisco Systems Inc. forecasted compelling revenue, which provided a rosy forecast for the company’s future. But Macy’s Inc. climbed as consumer demand for discretionary goods declined amid persistent inflation.

Last week, 222,000 people filed for their first unemployment claims, according to the data. Those indications sustained labor market improvement, down 4,000 from the previous week. In contrast to the rising chorus of tech layoffs that have hit recent weeks, the strong labor market stands in stark contrast, according to some analysts. Amazon’s Wednesday statement confirmed a layoff of around 10,000 positions. By doing so, Amazon joins the Facebook parent company – Meta Platforms Inc.