The S&P 500 Index has given back more than half of its post-election rally as Friday’s selloff steepens, with sticky inflation and hawkish comments from the Federal Reserve weighing on sentiment.
The broad equities benchmark was down 1.4 percent at midway through the session, putting it on track to lose 2.2 percent for the week, its worst weekly performance in two months. The tech-heavy Nasdaq 100 Index dropped 2.5 percent.
After hitting a record intraday high of 6017.31 on Monday, the S&P has tumbled, trading as low as 5860.53. Initial optimism over corporate growth under President-elect Donald Trump has started to fade, and traders are paring bets on rate cuts. Fed funds futures are pricing in a 62 percent chance of a 25-basis-point cut in December, down from the 83 percent on Wednesday.
Fed Chair Jerome Powell said on Thursday that the central bank isn’t in a hurry to lower rates given signs of strength in the US economy. His comments came after data showed that factory-gate prices picked up, initial jobless claims stayed subdued while consumer inflation remained firm.
While Thursday’s producer price index reading wasn’t that alarming by the standards 2022-2023, “the problem was it showed inflation remaining stubbornly above levels consistent with the Fed’s target,” said Deutsche Bank strategists led by Henry Allen. The person consumption expenditures price gauge in two weeks will now be key to watch, they said.
A weak outlook from chip-equipment maker Applied Materials Inc. weighed on shares of other semiconductor companies. Shares of vaccine makers also slid on Friday after Trump tapped Robert F. Kennedy Jr. to run the Department of Health and Human Services.
