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U.S. equity futures moved lower again Friday, setting up the three major benchmarks for weekly losses across the board, as investors pared bets on Federal Reserve interest rate cuts and repriced stock and bond markets for the upcoming administration of President-elect Donald Trump.
Stocks finished lower on Thursday, with another afternoon selloff tied to a jump in Treasury bond yields, this time linked to hawkish comments from Fed Chairman Jerome Powell.
Speaking as part of an investment forum in Dallas, Powell said the Fed could afford to be patient on future rate cuts, given the strength of the economy and the stubborn nature of inflation, setting up a potential conflict with the incoming Trump administration.
The [economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in prepared remarks to a business forum. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
“Inflation is running close to our 2% goal, but it’s not there yet, and we are determined to finish the job,” he added.
Fed Chairman Jerome Powell has told markets not to expect fast and consistent rate cuts heading into year-end and beyond.
Traders sharply pared bets on a December rate cut, with CME Group now pegging the odds at around 62%, down from as high as 85% late last month.
The prospect of higher-for-longer rates is also lifting Treasury yields, with rate-sensitive 2-year notes pegged at 4.321% in overnight trading and 10-year paper trading at 4.431%, having touched a July high of 4.46% in overnight trading.
Related: CPI inflation sparks Fed interest rate cut bets
Stocks are also trading with caution heading into the close of the week as Trump continues to form the base of his cabinet, opting for Robert F. Kennedy Jr., a longtime vaccine skeptic and thorn in the side of the pharmaceutical industry, as secretary of health and human services.
The selection of Florida Rep. Matt Gaetz as attorney general has also raised eyebrows and added to concern that the administration could spend a significant amount of political capital in a long fight to have the president-elect’s nominations confirmed by the Senate.
That’s all weighing on stocks, and other risk assets, heading into the start of trading Friday. Futures contracts tied to the S&P 500 are priced for a 28-point opening-bell decline and the Dow Jones Industrial Average is called 155 points lower
The tech-focused Nasdaq, meanwhile, is called 145 points lower with chip stocks in the red following a mixed set of fourth-quarter earnings from Applied Materials (AMAT) .
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In overseas markets, European stocks were marked 0.35% lower in early Frankfurt trading, with the FTSE 100 edging 0.12% higher in London.
Overnight in Asia, the regional MSCI ex-Japan benchmark slipped 0.23% while the Nikkei 225 snapped a three-day losing streak with a 0.28% gain in Tokyo.
Related: Veteran fund manager sees world of pain coming for stocks
