Why Are Stocks Down Today?
Source: shutterstock.com/Leonid Sorokin
The S&P 500 and Nasdaq Composite are each eyeing losses between 0.5% and 1%, respectively, heading into market close. Why are stocks down today?
Well, as has become a trend over the past few years, today’s losses can be attributed to the Federal Reserve. Indeed, it appears investors are showing a delayed response to Fed Chair Jerome Powell’s speech Friday. Specifically, Powell warned onlookers that it’s simply too early to begin cutting interest rates.
“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said in a speech at Spelman College.
Powell’s comments have served to temper Wall Street’s excitement after the strength of October’s inflation reports. Reasonably so, inflation read at near 0% month-to-month in October, reflecting just 3% annual price growth per the Fed-preferred Personal Consumption Expenditures (PCE) inflation gauge.
This has pushed much of Wall Street toward the “cut-rate” camp, under the impression that inflation has turned the corner. In fact, according to the CME FedWatch tool, treasury traders are pricing in a nearly 50% chance of a rate cut by March 2024.
Why Are Stocks Down Today?
It seems investors are anxious ahead of some crucial economic data releases later this week. Indeed, the November jobs report is due Friday, to mounting anticipation.
Investors will be closely watching jobs for signs of a potential recession in the making. Should jobs come in strong, but not exceedingly higher than expectations, it would be a good sign that the central bank may actually pull off a “soft landing” trajectory, where inflation eases without incurring an economic downturn. On the flip side, if unemployment comes in higher than expected, it would be further evidence in favor of a potential hard landing.
“We anticipate softening labor demand will remain a theme moving forward,” Wells Fargo economists led by Jay Bryson noted on Friday.
Today’s losses may also be a simple reaction to the recent strength in the stock market recently. The S&P and Nasdaq each reached new highs for the year last Friday, fully recovering from their respective October pullbacks, concluding five-straight weeks of gains. It’s only natural for some traders to hit the sell button after such a strong showing, pushing stocks down in the process.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
