Powell's Hawkish Remarks Shake Markets: Stocks Fall, Dollar Rockets, Bitcoin Dips
On November 14, 2024, Federal Reserve Chair Jerome Powell made some surprising comments that sent shockwaves through the markets. His hawkish tone caused major U.S. stock indices to drop, while the dollar soared for the fifth day in a row.
Powell spoke to business leaders in Dallas and highlighted the strength of the U.S. economy. He stated there is no rush for the Fed to lower interest rates. He reaffirmed the Fed's commitment to reaching a 2% inflation target, emphasizing the need for careful decision-making as inflation remains a concern.
He pointed out that productivity has increased faster in the last five years than at any time in the previous two decades. This positions the U.S. economy as a leader among major economies. Regarding the recent rise in the producer price index (PPI), he called it “more than just a bump” but expressed confidence in achieving the inflation goal.
Powell's remarks impacted the interest-rate market. Fed futures now show a lower likelihood of a 25-basis-point cut in December. The CME FedWatch tool reported that the chances of this cut dropped to 58%, down from about 80% earlier in the day.
The S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY), closed down 0.6%. This wiped out gains from last week’s rate cut. The energy sector was the only one to gain, rising by 0.4%. Meanwhile, the industrial and healthcare sectors led the declines, each down 0.7%.
Top performers in the S&P 500 included Tapestry Inc. (TPR), Wynn Resorts Ltd. (WYNN), and First Solar Inc. (FSLR), which saw increases of 12.8%, 8.7%, and 7.2%, respectively. On the other hand, Leidos Holdings Inc. (LDOS) and Super Micro Computer Inc. (SMCI) fell by 13.6% and 11.4%.
Tech stocks, represented by the Invesco QQQ Trust (QQQ), dropped by 0.7%, marking the fourth consecutive loss. The SPDR Dow Jones Industrial Average ETF (DIA) slipped by 0.5%, while small caps in the iShares Russell 2000 ETF (IWM) underperformed, falling by 1.3%.
The dollar continued to attract attention, with the Invesco DB USD Index Bullish Fund ETF (UUP) logging its fifth straight gain, reaching levels not seen since late October 2023. Treasury yields also rose, with the 10-year yield closing at 4.46%. Gold, tracked by the SPDR Gold Trust (GLD), marked its fifth consecutive loss.
In the cryptocurrency market, Bitcoin (BTC/USD) fell by 1.7% over the past 24 hours, trading at $88,013 as of 5:21 p.m. ET. This puts it on track for its worst day in November.
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