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Federal Reserve (FED) Chairman Jerome Powell made a rare appearance on the mainstream media during an interview with “60 Minutes” earlier Monday, further dashing widespread market expectations for a rate cut on the rocks of reality. U.S. data further dampened expectations for a rate cut, as U.S. Services Purchasing Managers’ Index (PMI) data showed economic activity picked up for a fourth consecutive month, while service provider inflation rose as economic activity led to higher prices.
Federal Reserve Chairman Jerome Powell said in an interview with “60 Minutes” that “the job is not done yet” on the issue of inflation, which further dampened market expectations for a rate cut. The U.S. central banker sounded cautious and reiterated that This follows recent warnings that market expectations for rate cuts have outstripped the Fed’s willingness and ability.
The U.S. ISM Services Purchasing Managers’ Index (PMI) for January was 53.4, a four-month high, beating expectations of 52.0 and beating last month’s 50.5 (revised 50.6) reading. The ISM service industry payment price index in the United States also rose sharply in January, climbing to 64.0 from 56.7 (revised to 57.4) last month.
With the rest of the week’s economic data schedule showing U.S. secondary data releases, markets will turn to major stock earnings reports to drive sentiment. The CME Group’s FedWatch Tool shows the market is now pricing in just a 16% chance of a rate cut by the Fed in March, down sharply from the more than 80% chance money markets had in December. The probability of a rate cut in May has also been slashed, with markets almost split on whether the Fed will cut rates at its May meeting.
The Nasdaq Composite dropped 0.2%, or 31.28 points, to close at 15,597.68 on Monday, while the S&P 500 lost more than 15 points, or 0.32%, to close at 4,942.81. The Dow Jones Industrial Average fell the most on the day, falling 0.71% or 274 points to close at 38,380.12 points.
