Stock Markets Conflicted as Expectations for Fed Rate Cuts Are Moderated

Dow Jones Stock Markets INDEXDJX:DJI

Stocks exhibited a mixed performance today, influenced by New York Fed President Williams’ cautious stance on potential Fed rate cuts. The S&P 500 increased by +0.05%, while the Dow Jones Industrials dipped by -0.05%, and the Nasdaq 100 rose by +0.67%. Williams deemed it “premature” to consider a March interest rate cut, impacting market sentiment. Weaker-than-expected U.S. economic reports further diminished hopes of a Fed-engineered soft landing for the economy. The U.S. Dec Empire manufacturing survey declined to a 4-month low, and Nov manufacturing production and Dec S&P manufacturing PMI fell below expectations.

Exelon and Scholastic faced notable declines, down over -4% and -11%, respectively. Exelon experienced downgrades from Bank of America Global Research and Guggenheim Securities, while Scholastic reduced its full-year adjusted Ebitda estimate. Tractor Supply also faced a downturn of over -3% following a downgrade by Bank of America Global Research.

Conversely, Steel Dynamics surged by over +5% after forecasting stronger-than-consensus Q4 EPS, while Intel rose by over +3% as it unveiled new chips for personal computers and data centers. Global Payments climbed over +4% after denying acquisition talks with Shift4 Payments, and Costco Wholesale reported Q1 EPS of $3.58, beating the consensus of $3.41, resulting in a more than +3% increase.

Overall, market volatility was heightened due to the triple witching event and index rebalancing. Current market expectations indicate a 14% chance of a -25 bp rate hike at the Jan 30-31 FOMC meeting and an 82% chance at the March 19-20 meeting. Bond yields in the U.S. and Europe displayed mixed movements, with T-note yields at 3.905%, German bund yields at 2.020%, and UK gilt yields at 3.697%. Overseas stock markets also showed mixed results, with the Euro Stoxx 50 up +0.35%, China’s Shanghai Composite Index down -0.56%, and Japan’s Nikkei Stock Index up +0.87%.

Featured Image:  Megapixl © Alexandersikov

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About the author: Stephanie Bedard-Chateauneuf has over six years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, health stocks, and personal finance. This stock lover likes to invest for the long-term. Stephanie has an MBA in finance.