It wasn’t the most forceful pushback it’s true, but the financial markets paid attention to Federal Reserve Chair Jerome Powell’s attempt to say interest rate cuts aren’t just around the corner for about two minutes. And then the rally based on a belief in 4 or 5 cuts in 2024, and as early as March (and certainly by May), was off and running again.
By 2 p.m. New York time today, December 1, the Standard & Poor’s 500 was up 0.48% and the Dow Jones Industrial Average was ahead 0.72%. The NASDAQ Composite and the NASDAQ 100 lagged as buying shifted from tech growth momentum stocks to interest rate sensitive blue chip and small-cap stocks. Those two tech-heavy indexes were still up but only by 0.26% and 0.25%, respectively. The small-cap Russell 2000, on the other hand, had gained 2.49%.
In a speech at Spelman College in Atlanta, not a high visibility venue, Powell said, “It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.”
In other words, don’t expect interest rate cuts tomorrow.
And don’t forget interest rate increases are still on the table, he continued. “We are prepared to tighten policy further if it becomes appropriate to do so,” he added. Powell, in his speech, highlighted that core inflation ran at an annual rate of 2.5% over the six months ending in October. “While the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2% objective,” he said.
Sorry, Jerome, no one is buying that.
The yield on the 10-year Treasury fell to 4.21% today, down 11 basis points.
Odds that the Fed will hold rates steady at its December 13 meeting rose to 97.5% today on the CME FedWatch tool from 96.5% a week ago.
