Wall Street Stocks Under Pressure After Powell Comments

Barry Adams
05 Feb, 2024
New York City

Stocks on Wall Street turned lower as worries about a higher-for-longer rate were reignited.

Federal Reserve Chair Jerome Powell reiterated the need to keep interest rates higher until policymakers are more confident about the sustainable downward path of inflation towards the target rate of 2%. 

Powell commented during an interview with the CBS 60 Minutes show that aired on Sunday.

Powell also clarified that while inflation is likely to slow down to the central bank's target rate of 2%, price levels are not expected to decline.

While inflation is on a downward path, the slowdown is largely because of the decline in energy prices and the easing of supply chain disruptions; neither of these two forces is impacted by the Fed's policy.

Powell's comments added to market anxieties after the non-farm payroll expanded at a faster pace in January and wage gains were ahead of inflation over the last twelve months, stoking fears of a rebound in inflation.

On the earnings front, investors reviewed the latest earnings from McDonald's, and about 400 leading companies are scheduled to release their quarterly results this week.

  

U.S. Indexes and Yields

The S&P 500 index increased 0.5% to 4,958.27, and the Nasdaq Composite rose 1.1% to 15,462.68.

The yield on 2-year Treasury notes increased to 4.45%. 10-year Treasury notes declined to 4.10%, and 30-year Treasury bonds edged down to 4.29%.

WTI crude oil increased $0.19 to $72.09 a barrel, and natural gas prices decreased 1 cent to $2.07 a thermal unit.

Gold decreased by $15.19 to $2,023.21 an ounce and extended the previous week's gains after the U.S. dollar drifted slightly lower in international trading.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.30.

 

U.S. Stock Movers

Elanco Animal Health soared 8% to $16.0 after the company agreed to sell its aqua business for $1.3 billion to Merck's animal health division.

Elanco plans to use most of the proceeds to pay down its debt and lower it by 20%.

Catalent jumped 9.9% to $59.90 after the healthcare company agreed to be acquired by Novo Holdings for $63.50 a share in cash. 

McDonald's decreased 0.6% to $295.0 after the fast food restaurant chain reported weaker-than-expected quarterly results.

Net sales in the fourth quarter increased 8% to $6.41 billion, net income rose to $2.04 billion from $1.9 billion, and diluted earnings per share advanced to $2.80 from $2.59 a year ago.

Global same-store sales rose 3.4%, driven by a 4.3% increase in U.S. domestic sales, but comparable sales lagged in the Middle East to 0.7%, weighed by the Israel-Hamas conflict.

The company said it plans to spend between $2.5 billion and $2.7 billion in capital expenditure and allocate more than half of its spending to open 2,100 new stores in the U.S. and international markets in 2024.

 

Week Ahead

This week, world investors are looking ahead to the release of earnings from major U.S.-listed corporations, including Alibaba, ARM Holdings, Caterpillar, Eli Lilly, Ford Motor, PayPal, PepsiCo, and Uber.

In Europe, investors are looking ahead to the release of Germany’s factory orders and the final reading on inflation.

Germany's exports and imports declined in December, but trade surplus rose for the fourth month in a row, the Federal Statistics Office, or Destatis, reported Monday.

Seasonally adjusted exports declined 4.6% from the previous month to €125.3 billion in December, and imports fell 6.7% to €103.1 billion.

In December, exports to the EU-member nations fell 5.5% to €67.5 billion and to the non-EU nations decreased 3.5% to €57.8 billion.

The shipments to the U.S. led all other nations and declined by 5.5% in December to €12.7 billion, followed by a decline of 7.9% to €7.5 billion to China and a fall of 4.3% to €7.4 billion to the U.K.

Across the Pacific, China is expected to release its inflation and current account data for the fourth quarter.

In addition, the central banks of India, the Philippines, and Australia are expected to keep rates unrevised.