Wall St indexes end down after Powell erodes hopes for December rate cut
Updates to market close
By Sinéad Carew and Lisa Pauline Mattackal
Nov 14 (Reuters) -Wall Street's main indexes closed loweron Thursday after Federal Reserve Chair Jerome Powell dampened investor hopes for another interest rate cut this year by sayingthe U.S. central bank need notrush to ease monetary policy.
Powell said at a Dallas Fed event that with the economy still growing, the job market solid and inflation still above the 2% target, the Fed can deliberate carefully on rate cuts.
While traders were still betting on a 25-basis point reduction at the Fed's December meeting, the probability sank to 55.5% from 76% earlier in the afternoon and from 82.5% on Wednesday, the CME FedWatch tool showed.
"The comments from Powell put more cold water on what used to be a very optimistic outlook on the path for rate cuts," said Adam Hetts, global head of Multi-Asset at Janus Henderson Investors.
"However, we can't take for granted that inflation and labor are in balance so this is an encouraging message on the economy."
According to preliminary data, the S&P 500 .SPX lost 36.23 points, or 0.61%, to end at 5,949.15 points, while the Nasdaq Composite .IXIC lost 123.07 points, or 0.64%, to 19,107.65. The Dow Jones Industrial Average .DJI fell 206.14 points, or 0.47%, to 43,752.05.
Earlier on Thursday data showed the producer price index for final demand rose 0.2% on a monthly basis in October, in line with forecasts, though the annual rise of 2.4% was a touch higher than expectations.
Jobless claims dropped 4,000 to a seasonally adjusted 217,000 for the week ended Nov. 9, lower than forecast.
"There's more and more evidence that inflation remains higher than the Fed's 2% target," said Melissa Brown, managing director for Investment Decision Research at SimCorp in New York. "The numbers were roughly in line with expectations but sometimes investors step back and say, 'What does this really mean?' It leads to more uncertainty about what the Fed does after the December meeting."
Last week's post-U.S. election rally has been waning this week as focus turned to the potential inflationary pressures from policies under President-elect Donald Trump's administration.
Among the S&P 500's 11 major industry sectors, industrials .SPLRCI was the biggest decliner with big drags from defense companies, which had rallied sharply in the days after the election.
RTX Corp RTX.N was the defense sector'sbiggest weight on Thursday, falling to its lowest level since Sept. 19 while General Dynamics GD.N was also a big drag, hitting its lowest level since Oct. 31.
The blue-chip Dow had some support from a rally in Walt Disney DIS.N after the entertainment giant reported quarterly earnings that beat Wall Street's estimates and offered robust guidance for the coming years.
Consumer discretionary stocks .SPLRCD also weighed on the S&P 500, with some pressure from electric vehicle makers.
Shares of electric vehiclemaker Tesla TSLA.O and Rivian Automotive RIVN.O fellafter Reuters reported that Trump's transition team is planning to kill the $7,500 consumer tax credit for electric-vehicle purchases as part of broader tax-reform legislation.
Some other Fed policymakers haveshifted their attention back to inflation risks as they weighed in on when, and how fast and far, to cut interest rates.
Fed Governor Adriana Kugler said the central bank hadmade considerable progress towardachieving its job and inflation goals. Richmond Fed President Tom Barkin said high union wage settlements and the possibility of coming tariff increases could make Fed officials more cautious about thinking they have won their battle against high inflation.
Tapestry TPR.N hit its highest level since 2013. TheCoach parent said it was terminating its $8.5 billion deal for Capri Holdings CPRI.N after the deal was blocked by a U.S. judge. Capri's shares also rose.
US unemployment claims https://reut.rs/4eAMbBf
Reporting by Sinéad Carew in New York, Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Shounak Dasgupta and Richard Chang
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