Wall St sinks on Powell rate-cut caution, Trump cabinet picks
Retail sales rise 0.4% in October, above forecasts
Indexes on track for weekly losses
Vaccine makers, packaged food cos fall after RFK Jr. appointment
Applied Materials down after Q1 rev forecast misses estimates
Indexes down: Dow 0.73%, S&P 500 1.41%, Nasdaq 2.36%
Updated prices at 3:03 p.m ET/ 2003 GMT
By Sinéad Carew and Lisa Pauline Mattackal
Nov 15 (Reuters) -The Nasdaq and S&P 500 were set for their biggest daily losses in over two weeks on Friday, after Federal Reserve Chair Jerome Powell pointed to a slower pace of interest-rate cuts and investors reacted to cabinet selections by U.S. President-elect Donald Trump.
Powell on Thursday pointed to ongoing economic growth, a solid job market, and inflation above the Fed's 2% target as reasons the U.S. central bank can afford to be careful with the pace and scope of future rate cuts.
As a result, traders increased bets the Fed will not change rates at its December meeting, pricing in a 38% chance, compared with roughly 14% a month ago, according to the CME FedWatch tool. They also dialed back expectations for easing in 2025.
This view was reinforced by this week's news of sticky inflation and Friday'seconomic data showing U.S. retail sales rose slightly more than expected in October, which signaledeconomic strength. Import prices also rebounded.
"In the last 48 hours we've had some pretty big changes, not just from the election but from economic data that was better than expected and Powell speaking about not having to be as aggressive on interest rate cuts," said Adam Rich, deputy chief investment officer for Vaughan Nelson in Houston.
"Market expectations for interest rate cuts have come down materially and also the market is readjusting after a pretty bullish reaction to the U.S. election."
All three major U.S. stock indexes were headed for weekly losses as market focus shifted from the U.S. election to rate cuts and potential inflation risks under the next administration.
Stocks of vaccine makers and packaged food companies also dippedafter Trump said he would nominateRobert F Kennedy Jr, who has spread misinformation on vaccines and criticized ultra-processed foods, to head the Department of Health and Human Services.
As of 03:03 p.m. ET, the Dow Jones Industrial Average .DJI fell 318.33 points, or 0.73%, to 43,432.53, the S&P 500 .SPX lost 83.78 points, or 1.41%, to 5,865.39 and the Nasdaq Composite .IXIC dropped 450.89 points, or 2.36%, to 18,657.10.
Also contributing to volatility on Friday was the regular expiration of stock and index options, according to Rich.
Since the post-election rally in stocks had reducedexpectations for stock market volatility to multi-month lows, Brent Kochuba, founder of financial insights company SpotGamma, said Friday's stock market weakness was partly due to investors being ill-prepared for a pullback.
CBOE's volatility index .VIX, also known as Wall Street's fear gauge, hit17.55 on Friday, its highest level since Election Day on Nov. 5.
Shares of defense firms and government contractors extended their losing streak after Trump named Elon Musk and former Republican presidential candidate Vivek Ramaswamy to heada new Department of Government Efficiency.
Among the S&P 500's 11 major industry sectors information technology .SPLRCT was the biggest decliner, dropping 2.6%.Rich noted that investors appeared to rotating out of sectors that worked ahead of the election.
Also, it did not help that the Philadelphia SE Semiconductor index .SOX fell 3.4%.The chip sector lost ground partly in sympathy with Applied Materials AMAT.O, which tumbled 9% after the U.S. maker of chip-manufacturing equipment forecast first-quarter revenue below Wall Street estimates.
Moderna MRNA.O slumped 6.5% and Pfizer PFE.N lost 4.8%,while the healthcare sector .SPXHC dropped 1.9%, hitting its lowest since May.
The consumer staples index .SPLRCS segment was also impacted by the nomination news, with Monster Beverage was off 6%, Lamb Weston LW.N down 4.6% and PepsiCo PEP.O down 4%.
The small-cap Russell 2000 index .RUT fell 1.5%,heading for its fourth consecutive session of declines and biggest weekly decline in over two months.
Declining issues outnumbered advancers by a 2.19-to-1 ratio on the NYSE where there were 96 new highs and 100 new lows.
On the Nasdaq, 1,116 stocks rose and 3,118 fell as declining issues outnumbered advancers by a 2.79-to-1 ratio. The S&P 500 posted 11 new 52-week highs and 24 new lows while the Nasdaq Composite recorded 31 new highs and 265 new lows.
Monthly change in US retail sales https://reut.rs/4i10zGa
Reporting by Sinéad Carew, Saqib Iqbal Ahmed in New York, Lisa Mattackal and Purvi Agarwal in Bengaluru; Editing by Devika Syamnath and Richard Chang
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