WALL STREET
will hold rates steady “for as long as needed.” But he also acknowledged the Fed could cut rates if the job market unexpectedly weakens.
Treasury yields climbed immediately after Powell’s comments. They had already been higher after the Fed’s vice chair made similar comments earlier in the day.
Philip Jefferson said his expectation is for inflation to keep easing and for the Fed to hold its main rate “steady at its current level.” That contrasted with his remarks in February, when he said “it will likely be appropriate to begin dialing back policy restraint at some point this year” if things went as he expected.
The yield on the two-year Treasury, which tracks expectations for Fed action, shot as high as 5% immediately after Powell spoke and got back to where it was in November.
But yields later pared their gains as the afternoon progressed, and the two-year yield drifted back to 4.98%. That’s still up from 4.91% late Monday.
Traders are mostly betting on the
Fed delivering just one or two cuts to interest rates this year after coming into 2024 expecting six or more. They’re now also betting on a 12.5% probability that no cuts are coming, up from just 1.2% a month ago, according to data from CME Group.
The threat of rates staying high for longer hit real-estate investment trusts and utility stocks particularly hard. They pay relatively high dividends and tend to attract the same kind of investors as bonds do. When bonds are paying higher yields, income-seeking investors may camp there instead.
Real-estate stocks fell 1.5% for the largest loss among the 11 sectors that make up the S&P 500. Utilities weren’t far behind with a loss of 1.4%.
High rates can also translate into more expensive mortgages, and stocks of homebuilders slumped after a report showed they broadly broke ground on fewer sites last month than economists expected. Lennar fell 2.3%, and D.R. Horton sank 2%.
Northern Trust slumped 5% after the financial services company reported weaker earnings for the start of the year than analysts expected. Johnson & Johnson sank 2.1% despite
topping profit forecasts. Its revenue came in a whisper below expectations.
Companies are under even more pressure than usual to report fatter profits and revenue because the other lever that sets stock prices, interest rates, looks unlikely to add much lift soon.
The stock of Donald Trump’s social-media company also slumped again. Trump Media & Technology Group fell another 14.2% to follow up on its 18.3% slide from Monday.
The company said it’s rolling out a service to stream live TV on its Truth Social app, including news networks and “other content that has been cancelled, is at risk of cancellation, or is being suppressed on other platforms and services.”
The stock has dropped below $23 after nearing $80 last month as euphoria fades around the stock and the company made moves to clear the way for some investors to sell shares.
In markets abroad, stock indexes tumbled across Asia and Europe as they caught up with the drubbing Wall Street took on Monday. Stock indexes fell 2.1% in Hong Kong, 2.3% in Seoul and 1.8% in London.