And suddenly, half of the stock market's euphoric gains after Trump's election have vanished.
The Nasdaq leads the falls in the market
Major US indices posted sharp declines on Friday, led by the tech-heavy Nasdaq (QQQ), as investors digest that there may not be a rate cut in December as expected.
The turning point came on Thursday, when Federal Reserve Chairman Jerome Powell stated that neither he nor the central bank are in a rush to cut rates, given the positive signals sent by the economy.
S&P 500 declines after weeks of gains
Stocks retreated in the afternoon session, and that pressure continued on Friday. The S&P 500 (SPY) fell as much as 1.6%, giving back more than half of its accelerated 4% post-election gain. The Nasdaq Composite (QQQ) fell 2.7% at its intraday low.
The S&P 500 lost 2.2% this week, while the Dow Jones Industrial Average (DIA) fell 1.2% and the Nasdaq fell 3.2%.
Economic data and rate expectations
The losses have emerged as the odds of a 25 basis point rate cut in December have diminished. Investors now assign a 58% probability for such action at the next meeting, up from 80% before Powell's speech, according to the CME FedWatch Tool.
Federal Reserve Chairman Jerome Powell's remarks come amid a series of promising economic data in the United States.
On Friday, retail sales data showed signs of strength, and on Thursday, jobless claims numbers were surprisingly low.
Investors have been grappling with what Trump will ultimately mean for the market as the dust settles from a widespread buying spree.
Concerns have been raised about whether Trump's protectionist trade policies will boost inflation, possibly requiring eventual rate increases.
So far, investors seemed content to focus on Trump's plan to cut taxes and deregulate. But now it seems that Jerome Powell has given them something else to think about, and worry about.
Major US indices at Friday's close:
S&P 500 (SPY): 5,870.62, down 1.3%.
Dow Jones Industrial Average (DIA): 43,444.99, down 0.7% (306 points).
Nasdaq Composite (QQQ): 18,680.12, down 2.2%.
Other events of the day:
5 charts show Trump's immense impact on the post-election market, according to BofA (BAC).
Healthcare stocks fell following Trump's appointment of vaccine skeptic RFK Jr.
UBS says Trump's plan to build homes on federal land could drive up home prices.
The oil market will face a large surplus next year due to weak Chinese demand and record US production, according to the IEA.
In commodities, bonds and cryptocurrencies:
West Texas Intermediate Crude Oil: Down 2.5% to $67.01 per barrel.
Brent: The international benchmark fell 2% to 71.11 USD per barrel.
Gold: Down 0.2% to $2,567.60 per ounce.
10-Year Treasury Yield: Up less than one basis point to 4.44%.
Bitcoin (BTC): Up 3.5% to $91,271.20.
