Stocks Close Lower on Fading Hopes for Fed Slowdown
Cautious comments from Federal Reserve officials and strong economic data tame enthusiasm sparked by recent inflation data
By Joe WallaceFollow
and Corrie DriebuschFollow
Updated Nov. 17, 2022 4:36 pm ET
The S&P 500 fell 12.23 points, or 0.3%, to 3946.56, paring its steeper losses from earlier in the day. The benchmark gauge had lost 0.8% Wednesday, giving up some of the banner gains stocks posted last week.
The technology-focused Nasdaq Composite declined 38.70 points, or 0.3%, to 11144.96. The Dow Jones Industrial Average edged down 7.51 points, or less than 0.1%, to 33546.32. All three indexes remain up for November.
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Stocks ripped higher last week when inflation data slowed, leading to hopes that the Federal Reserve would slow its campaign of interest-rate increases. Fed officials have pushed back at that suggestion, while strong economic data have further raised concerns the Fed will keep raising rates for some time.
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Speaking Thursday, St. Louis Fed President James Bullard said interest rates have to rise higher to restrict the economy to an extent that brings inflation back to the Fed’s target. Mr. Bullard didn’t say a specific number, but a chart accompanying his remarks suggested the Fed’s policy rate could rise to a range between 5% and 7%. The Fed this month raised its target rate to a range of 3.75% to 4%.
“A lot of the market’s rally over the past week has been on expectations that the Fed will imminently pivot,” said Edward Park, chief investment officer at Brooks Macdonald. “The Fed has made clear it won’t do that.”
Nonetheless, Mr. Park said that “if inflation starts to fade, the Fed will back off…. We just need a bit of time to work out if inflation has truly peaked, or whether the November figure, like the July number, is not truly reflective of the broader trend.”
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On the economic front, data showed 222,000 people filed for initial jobless claims last week. That is down by 4,000 from the week before and points to continuing strength in the labor market.
That stands in contrast with the growing wave of layoffs hitting the technology sector in recent weeks, and some analysts say it suggests more job cuts are to come. On Wednesday, Amazon said it plans to cut about 10,000 jobs, joining Facebook parent Meta Platforms in announcing layoffs.
“The market got ahead of itself in pricing in Fed rate cuts in 2023,” said John Brady, managing director at futures brokerage R.J. O’Brien. “The fact of the matter is, it will be tough to see inflation collapse at the pace it rose in 2021 and 2022.”
In debt markets, the yield on 10-year Treasury notes climbed to 3.774% from 3.693% Wednesday. Two-year yields rose to 4.452% from 4.363%. Yields and prices move in opposite directions.
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The U.K.’s economic-policy update is also in focus for investors. Chancellor Jeremy Hunt unveiled the biggest tax increases and spending cuts in a decade, in part an attempt to regain the faith of investors who took fright when his predecessor tried to cut taxes earlier in the fall. He said the U.K.’s fiscal watchdog estimates that the country is in recession.
A trader worked on the floor of the New York Stock Exchange last week.Photo: Spencer Platt/Getty Images
Overseas stock markets were broadly lower. The Stoxx Europe 600 fell 0.4%. China’s Shanghai Composite fell 0.1% and Japan’s Nikkei 225 lost 0.3%.
Oil prices fell. Benchmark Brent-crude futures slipped 3.3% to $89.78 a barrel. Subdued demand in China is weighing on prices, said Tamas Varga of brokerage PVM Oil in a note to clients.
Write to Joe Wallace at
joe.wallace@wsj.com and Corrie Driebusch at