The stock market hit a wall Friday as investors took a hard look at the Federal Reserve's shifting stance on interest rates. Fed Chair Jerome Powell poured cold water on hopes for quick rate cuts, signaling the central bank is in “no hurry” to ease policy. Throw in stronger-than-expected retail sales for October, and suddenly, the narrative of an economy cooling fast enough for rate relief is looking shaky. The S&P 500 (SPY, Financial) slid 1.4%, the Nasdaq tumbled 2.2%, and the Dow gave up 350 points as markets digested Powell's cautious tone and rising Treasury yields, which are now back near recent highs.
Big tech took a nosedive, with Amazon (AMZN, Financial), Nvidia (NVDA, Financial), and Microsoft (MSFT, Financial) each losing from 2.9% to 3.8%, as investors backed away from rate-sensitive megacaps. It wasn't just the tech sector feeling the squeeze—small caps and healthcare stocks were also battered. Pfizer (PFE, Financial) and Moderna (MRNA, Financial) dropped like a rock after President-elect Donald Trump's eyebrow-raising pick of vaccine skeptic Robert F. Kennedy Jr. for a key cabinet position. Meanwhile, the Russell 2000 posted its worst week in over two months, and the Nasdaq 100 logged its first five-day losing streak since January. That post-election rally? It's officially out of steam as Wall Street shifts its focus from political optimism to the reality of stubborn inflation and a hawkish Fed.
Despite the sell-off, not everyone's hitting the panic button. Bank of America still sees room for the S&P 500 to tick higher by year-end, riding on hopes of corporate tax cuts and looser regulations under a Republican-led government. But with bond yields climbing and investor sentiment teetering on the edge of “too bullish,” caution is creeping in. Powell's message is clear: this economy is strong enough to keep inflation running hot—and that means rate cuts aren't coming anytime soon. For investors, it's time to brace for some turbulence as Wall Street adjusts to a more cautious Fed and uncertain fiscal policies ahead.
