Overview
On Friday, U.S. stocks fell sharply, capping off their worst weekly performance in over two months as investors reassessed the Federal Reserve’s monetary policy stance and reacted to key cabinet appointments by President-elect Donald Trump. The Dow Jones Industrial Average dropped 0.70%, the S&P 500 lost 1.32%, and the Nasdaq Composite declined 2.24%, marking its biggest single-day drop in two weeks.
Federal Reserve Chair Jerome Powell’s comments on Thursday, emphasizing a cautious approach to rate cuts due to solid economic growth and persistent inflation above the 2% target, weighed heavily on market sentiment. The likelihood of a December rate cut fell to 42%, down significantly from earlier in the week. October retail sales, which rose 0.4%, exceeded expectations, further tempering hopes for aggressive monetary easing.
Healthcare stocks plunged after Trump nominated Robert F. Kennedy Jr., a known vaccine skeptic, to lead the Department of Health and Human Services. Vaccine manufacturers Moderna and Pfizer fell 7.3% and 4.7%, respectively, dragging the healthcare sector to its lowest point since May. Technology stocks also slumped, with the Philadelphia Semiconductor Index dropping 3.4%, led by Applied Materials, which fell 9.2% after a disappointing revenue forecast.
- Dow Jones Industrial Average: Fell 0.70% to 43,444.99
- S&P 500: Lost 1.32% to 5,870.62
- Nasdaq Composite: Dropped 2.24% to 18,680.12
Fear & Greed Index
Fear – Investor sentiment turned cautious as Powell’s remarks and Trump’s cabinet picks fueled uncertainties about future policies and inflation risks.
Sector Performance
- Winners:
- Utilities: Modest gains as investors sought defensive sectors amid broader market declines.
- Losers:
- Healthcare: Declined 1.88%, with vaccine manufacturers and packaged food companies leading losses due to Trump’s controversial cabinet nomination.
- Information Technology: Fell 2.5%, with semiconductor stocks hit hardest.
- Consumer Staples: Dropped 0.8%, dragged down by significant declines in Monster Beverage, Lamb Weston, and Keurig Dr Pepper.
Key Movers
- Applied Materials (AMAT): Tumbled 9.2% following a first-quarter revenue forecast below Wall Street expectations.
- Moderna (MRNA): Dropped 7.3%, and Pfizer fell 4.7% due to uncertainty over vaccine policies under Trump’s administration.
- Monster Beverage (MNST): Lost 7%, while Lamb Weston and Keurig Dr Pepper fell 6% and 5%, respectively, hitting multi-month lows.
Economic Data
- Retail Sales: Rose 0.4% in October, beating forecasts and reflecting steady consumer spending despite rising inflation concerns.
- Import Prices: Increased for the first time in three months, signaling potential cost pressures ahead.
Outlook
As market optimism from Trump’s election win gives way to concerns about inflation and fiscal policies, investors are closely monitoring the Federal Reserve’s next moves. With Powell signaling caution on rate cuts, the probability of further easing in December has decreased, leading to heightened uncertainty. Fiscal policies under Trump, particularly in healthcare and technology, are expected to remain volatile, with the possibility of policy shifts adding further market risks.
Growth-sensitive sectors like technology and consumer discretionary may face continued pressure, especially as inflation risks rise. Conversely, defensive sectors such as utilities could gain traction as investors seek stability. With volatility levels elevated, markets are expected to remain reactive to policy developments and macroeconomic data in the weeks ahead.