(Bloomberg) — Stocks extended this week’s losses after weaker-than-estimated economic data, with traders expecting the Federal Reserve to signal their rate-cut plan remains on hold.
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Equities edged lower after data showed US factory activity contracted — while input prices rose at the fastest pace since 2022. Separately, job openings figures signaled more softening in the labor market. Bonds saw small gains as the Treasury kept its quarterly debt sales steady and said it will start buybacks this month.
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Fed officials are poised to leave rates unchanged for a sixth consecutive meeting and signal no plans for cuts in the near future after higher-than-expected inflation. The decision, and possibly an announcement on the pace of the balance-sheet reduction program, will be released at 2 p.m. in Washington. Chair Jerome Powell will hold a press conference 30 minutes later.
The S&P 500 hovered near 5,015, while the tech-heavy Nasdaq 100 lost about 1%. Advanced Micro Devices Inc. led losses in chipmakers after a bearish forecast for artificial-intelligence processors. AI darling Super Micro Computer Inc. tumbled 15% on disappointing results. Amazon.com Inc. climbed as its cloud unit posted strong sales growth.
Treasury 10-year yields fell three basis points to 4.65%. The dollar was little changed. Oil sank as US crude inventories swelled to the highest since June.
What Will Powell Say?
Powell will have to maintain a much more hawkish tone. The Fed will have to acknowledge the recent deterioration in the inflation outlook.
While the bar for a hawkish surprise is high, dropping the guidance for easing “at some point this year” is possible and would certainly roil markets.
The data-dependent approach locks the Fed into a hawkish tone. If Jay Powell aims his caution only at the medium term, the impact may be muted, though, as the swap market has already absorbed a hawkish multi-month delay to rate cuts.
But bonds (and…
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