US stocks experienced a decline on Monday following Federal Reserve Chair Jerome Powell’s statement that the central bank is not yet prepared to cut interest rates. Powell emphasized the need for more evidence of sustainable inflation decline before considering a rate cut. The Dow Jones Industrial Average dropped 275 points, or 0.7%, while the S&P 500 and Nasdaq Composite also experienced losses of 0.3% and 0.2% respectively.
Investors reacted to Powell’s comments by causing Treasury yields to rise. The 10-year yield increased to 4.16% from Friday’s close of 4.03%. Powell’s remarks dashed hopes for a rate cut in March, especially after a strong January jobs report. Analysts from Bespoke Investment Group suggested that if inflation data continues to meet expectations, the Fed may consider cutting rates by the summer.
The Fed closely monitors the Personal Consumption Expenditures (PCE) price index as a gauge for inflation. In December, the PCE index rose 2.6% annually. However, when excluding energy and food components, the core PCE price index increased by 2.9% from the previous year, reaching its lowest point since March 2021. Powell and other central bank officials often refer to the core PCE inflation as a more reliable indicator of future inflation trends.
Market expectations for a rate cut in March decreased to 17% from 46% a week ago. However, financial markets are currently pricing in a 93% chance of a rate cut by June.
In other news, McDonald’s shares fell 3.7% after the company reported mixed earnings and highlighted the negative impact of Middle East turmoil on its business. Boeing shares also declined by 1.3% due to the discovery of a new problem during the production of 737 Max jets, which will require reworking approximately 50 undelivered planes. On a positive note, Estee Lauder shares surged by 12.1% following a strong quarter and the announcement of employee layoffs of up to 5%. Snap shares initially gained but later lost 1.8% after the company revealed plans to cut 10% of its global workforce.
As the trading session concludes, it is important to note that stock levels may experience slight changes.
CNN’s Alicia Wallace contributed to this report.