Stocks sold off late Wednesday after Fed Chair Jerome Powell pushed back on expectations for another interest rate cut in December, warning that such a move is "far from a foregone conclusion” as the Federal Open Market Committee remains divided and incoming data remains clouded by shutdown-related gaps.
"We haven't made a decision for December," Powell said during his press conference. "There are strongly differing views about how to proceed.”
Powell compared the economic outlook to “driving in the fog,” suggesting the central bank may hit pause if the path forward becomes too unclear. The ongoing government shutdown has stalled key economic reports, leaving policymakers flying partially blind.
"If there's a high level of uncertainty, that could be an argument for caution about moving," he said.
Markets Flip As Powell Pours Cold Water On Rate Cut Hopes
By 3:30 p.m. ET, the S&P 500 fell 0.2% to 6,879.68, while the Dow Jones dropped 185 points, or 0.3%, and the small-cap Russell 2000 slumped 1.4%.
The Nasdaq 100 held a modest 0.3% gain. The CBOE Volatility Index (VIX), a key measure of market fear, surged 5% to 17.3
Sectors most sensitive to interest rates took the biggest hit, with the Real Estate Select Sector SPDR Fund (NYSE:XLRE) down 3%, the Financials Select Sector SPDR Fund (NYSE:XLF) down 1.9% and the Materials Select Sector SPDR Fund (NYSE:XLB) off 1.8%.
Housing-related and consumer discretionary names led the retreat, reflecting renewed fears that borrowing costs may not come down as expected. Financials also dropped as investors scaled back expectations for near-term Fed easing.
According to CME Group FedWatch, markets now assign a 88% chance on a 25-basis-point cut in December, down from nearly 100% a day earlier.
Powell also emphasized that the Fed's policy rate is now within the range of many estimates for neutral — the rate that neither stimulates nor slows the economy — after 150 basis points of cuts since earlier this year. Some Fed officials, Powell added, feel this could be the right moment to step back and evaluate.
"For some part of the Committee, it is time to maybe take a step back and see whether there really are downside risks to the labor market."
According to Benzinga Pro data, here are the 15 worst-performing U.S.-listed stocks with market caps above $10 billion during Powell's press conference:
- Toll Brothers (NYSE:TOL) -3.97%
- Rocket Companies (NYSE:RKT) -3.85%
- Guidewire Software (NYSE:GWRE) -3.67%
- D.R. Horton (NYSE:DHI) -3.49%
- Generac Holdings (NYSE:GNRC) -3.31%
- Lennar Class B (NYSE:LEN) -3.19%
- Affirm Holdings (NASDAQ:AFRM) -2.92%
- TopBuild Corp. (NYSE:BLD) -2.85%
- PulteGroup (NYSE:PHM) -2.84%
- Avantor (NYSE:AVTR) -2.81%
- Lennar (NYSE:LEN) -2.71%
- NVR (NYSE:NVR) -2.42%
- Wayfair (NYSE:W) -2.39%
- Lennox International (NYSE:LII) -2.35%
- Carlisle Companies (NYSE:CSL) -2.21%
Source: Benzinga Pro
Read now:
Image: Shutterstock
