Wall Street Rattled as Powell Downplays Next Move: Markets Wrap
(Bloomberg) — Wall Street was shaken Wednesday as evidence of division at the Federal Reserve over the future of monetary policy whipsawed stocks and pushed bond yields higher.
After the central bank delivered a widely anticipated rate cut, Chair Jerome Powell counseled against trying to predict whether another reduction was likely in 2025. His remarks reined in expectations in financial markets, with traders reducing bets on a quarter-point cut in December.
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“In the committee’s discussions at this meeting there were strongly differing views about how to proceed in December. A further reduction in the policy rate at our December meeting is not a foregone conclusion — far from it. Policy is not on a preset course,” he said.
Officials delivered their second straight rate reduction to support a softening labor market, and said they would stop shrinking the portfolio of assets on Dec. 1. Governor Stephen Miran dissented again in favor of a larger reduction. Kansas City Fed President Jeff Schmid said he preferred not to cut rates at all.
“Given these dissents on both sides, it might be difficult to put a down payment on December,” said Neil Dutta at Renaissance Macro Research.
The S&P 500 wiped out its gain. A gauge of megacaps climbed as Nvidia Corp. became the first $5 trillion company. In late hours, Alphabet Inc. reported solid sales. Meta Platforms Inc. sees total expenses to significantly rise in 2026. Microsoft Corp.’s expansion in its Azure unit failed to inspire traders.
The yield on two-year Treasuries jumped 11 basis points to 3.6%. The dollar advanced.
“Powell gave investors a peak behind the curtain showing markets that there is no forgone agreeable path when it comes to the committee voters,” said Jay Woods at Freedom Capital Markets. “Their goal to satisfy their dual mandate remains tricky and could prove quite delicate going forward.”
The knee-jerk reaction is a great example of the market being forward-looking because the immediate news – a rate cut and the end of quantitative tightening – are both positives for stocks and bonds, according to Chris Zaccarelli at Northlight Asset Management.
“However, markets already expected this and were negatively surprised that future cuts might be taken off the table,” he said.
Zaccarelli thinks this will prove to be a buying opportunity because the Fed is likely to continue to support both stock and bond markets by cutting rates significantly over the next 12 months. That’s even if officials do keep rates unchanged in December.
“At a time when it’s flying with only one eye open, the Fed decided that the softening in the labor market is a bigger concern than the stickiness of inflation,” said Jack McIntyre at Brandywine Global. “What makes less sense is the odd range of dissents. This divergence means less complacency in financial markets, more volatility, and more two-way flows.”
To Bret Kenwell at eToro, the biggest question now is: which side of the dual mandate will the Fed focus on — the weakening labor market or persistent inflation?
Inflation could very well keep the Fed from moving as quickly or aggressively as they’d like to head off further weakness in the labor market, but that task becomes even more difficult without key economic updates, he said.
“If a December rate cut is ‘far from’ a foregone conclusion as Chair Powell stated, will that have investors hitting the brakes on the market’s recent run? Earnings will play a large role over the next several days, but we could see some profit taking after a powerful run,” Kenwell noted.
As long as earnings growth remains strong and the consumer remains resilient, pullbacks could lead to a compelling buying opportunity, he says.
“That’s as the shallow, short-lived dips over the last few months have left plenty of cash-heavy investors on the sideline waiting for a more enticing buying opportunity to emerge,” he concluded.
While the upward momentum in large-cap technology and growth continues, the diverging breadth and underperformance in small- and mid-cap stocks raise some concerns, according to Craig Johnson at Piper Sandler.
“Investors must remain vigilant within the current uptrend, especially as volatility will likely increase with earnings results and Fed commentary,” he said.
“When we look at this setup against overbought chart conditions which extend across multiple time frames, it continues to imply the potential for elevated volatility into year-end 2025,” said Dan Wantrobski at Janney Montgomery Scott.
While Wantrobski is still looking for the S&P 500 to hit the 7,000 mark this year – with an intermediate-term target toward 7,400 – he notes that markets are still vulnerable to “air pockets, some of which could prove pretty nasty.”
“November may be a target, despite its reputation as one of the best months for stocks,” he said.
Technology’s weight in the S&P 500 has been trending higher since the 1970s, and the sector currently makes up a record share of the index, according to Rob Anderson at Ned Davis Research.
Relative to the long-term trend, the move looks less extreme compared to 2000, he noted. However, the reading is still well into the top quintile of all observations, consistent with sector underperformance one, three, five, and 10-years later, on average.
“It often pays to go against the crowd when sentiment reaches an extreme” and then reverses, which has not yet occurred, he said. “However, the reading suggests risk is elevated for the sector,” Anderson said.
Corporate Highlights:
EBay Inc. gave a profit forecast for the fourth quarter that missed the average analyst estimate, stoking investor concerns about narrowing margins heading into the holiday shopping season. Starbucks Corp. posted positive same-store sales growth for the first time in over a year, an early sign the coffee chain’s turnaround efforts are gaining traction. Chipotle Mexican Grill Inc. cut its full-year projection for a third time this year, as diners pulled back from eating out amid heightened economic pressure. Caterpillar Inc. posted stronger-than-expected earnings and revenue on the back of surging demand from AI data centers for its power-generation equipment. Boeing Co. announced a $4.9 billion accounting charge and delayed debut for its 777X jetliner, a reminder of the long recovery ahead for the US planemaker even as rising aircraft deliveries bolster its cash. Boeing is laying plans to push production of its 787 Dreamliner to new heights, testing its ability to clear an inventory of parked planes and the strength of its strapped supply chain. Kraft Heinz Co. lowered its sales outlook as its chief executive officer said that the feeling of US shoppers has fallen to historic a low. Verizon Communications Inc. reported a loss in wireless phone subscribers in the third quarter as a new chief executive officer laid out an aggressive growth strategy to reclaim market share. CVS Health Corp. raised its 2025 profit guidance for a third time in less than six months, a sign that it’s set a new foundation a year into Chief Executive Officer David Joyner’s tenure following challenges in its insurance business. Fiserv Inc. plunged after the fintech slashed its outlook for full-year earnings and unveiled third-quarter results that confounded Wall Street analysts. Paramount Skydance Corp. began a planned round of job cuts involving 1,000 workers on Wednesday as part of an effort to slash $2 billion in costs following its August merger with Skydance Media. More cuts are expected at a later date. Centene Corp.’s third-quarter profit surpassed Wall Street expectations and the health insurer raised its outlook, a potential sign of relief for investors after the company’s profit view collapsed earlier this year. Caesars Entertainment Inc., a major operator of resort casinos, reported third-quarter results that fell short of Wall Street estimates. Edison International’s executives said the company’s equipment will likely be found to be associated with triggering the deadly Eaton Fire in Los Angeles. Uber Technologies Inc. is preparing to offer driverless rides on vehicles developed by Lucid Group Inc. and Nuro Inc. in the San Francisco Bay Area for the first time next year, thrusting the company into direct competition with Waymo’s robotaxi service. Thermo Fisher Scientific Inc. agreed to acquire Clario Holdings Inc., a privately held maker of drug trial software, for about $8.9 billion in cash. Online marketplace Etsy Inc. will elevate Chief Growth Officer Kruti Patel Goyal to the CEO job, entrusting the company veteran with navigating the artificial intelligence era and lifting the marketplace out of a post-pandemic slowdown. Airbus SE is keeping its ambitious jet delivery target, setting the company up for a furious production pace to close out the year, after reporting strong quarterly earnings on the back of the defense and space unit. UBS Group AG results failed to dispel investor anxiety about risks from previously canceled Credit Suisse bonds, the potential impact of Swiss capital reforms and the lender’s involvement in the First Brands bankruptcy, overshadowing a set of earnings that broadly beat expectations. Deutsche Bank AG exceeded analyst estimates for fixed-income trading, giving tailwind to Chief Executive Officer Christian Sewing just a couple of weeks before he presents a new strategy. Banco Santander SA posted third-quarter results that beat analysts’ estimates as profit jumped in the US and provisions for souring loans remained contained. GSK Plc raised its profit and sales forecasts for the year, aided by its HIV and immunology medicines, in Emma Walmsley’s last report as chief executive officer. Mercedes-Benz Group AG confirmed its annual outlook and plans to proceed with a €2 billion ($2.3 billion) share buyback after the company’s automaking margin climbed in the third quarter. SK Hynix Inc. reported a 62% jump in profit and revealed it’s sold its entire memory chip lineup for next year, illustrating how a global AI infrastructure buildout is ratcheting up sector-wide demand. Indonesia’s GoTo Group raised its earnings forecast for the year, a sign that new initiatives and cost cuts to cope with fierce competition in the ride-hailing and delivery market are paying off. What Bloomberg Strategists say…
“Chair Jerome Powell’s comment about a ‘growing chorus’ favoring the Fed stepping to the sidelines amid the uncertain economic outlook suggests there was more hawkish sentiment behind the scenes at Wednesday’s meeting than just a single dissent in favor of a pause.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 was little changed as of 4 p.m. New York time The Nasdaq 100 rose 0.4% The Dow Jones Industrial Average fell 0.2% The MSCI World Index fell 0.2% Bloomberg Magnificent 7 Total Return Index rose 1% The Russell 2000 Index fell 0.9% Currencies
The Bloomberg Dollar Spot Index rose 0.3% The euro fell 0.5% to $1.1596 The British pound fell 0.6% to $1.3187 The Japanese yen fell 0.5% to 152.84 per dollar Cryptocurrencies
Bitcoin fell 2% to $110,613.01 Ether fell 1.7% to $3,910.89 Bonds
The yield on 10-year Treasuries advanced nine basis points to 4.07% Germany’s 10-year yield was little changed at 2.62% Britain’s 10-year yield was little changed at 4.39% The yield on 2-year Treasuries advanced 11 basis points to 3.60% The yield on 30-year Treasuries advanced seven basis points to 4.61% Commodities
West Texas Intermediate crude rose 0.3% to $60.36 a barrel Spot gold fell 0.2% to $3,942.42 an ounce ©2025 Bloomberg L.P.
