Wall Street’s main indexes have fallen following a report the Federal Reserve plans to cut interest rates by only a quarter percentage point at the end of the month.
The benchmark S&P 500 on Friday erased earlier marginal gains after a Wall Street Journal report on the Fed’s plans.
According to the report, while the US central bank is not prepared to make a bigger 50-basis-point cut, it may make further rate cuts in the future given concerns about a decline in global economic growth and uncertainty about trade.
On Thursday, stocks had risen as comments from New York Fed president John Williams increased hopes of a bigger rate cut. Later that day, however, a New York Fed representative said Williams’ comments were not intended to telegraph any hints about upcoming Fed policy actions.
“It appears that the Fed has communicated its message,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. “They’re basically trying to clarify their policy.”
Futures market odds of a 50-basis-point cut at the Fed’s July meeting soared to 71 per cent late on Thursday immediately after Williams’ speech but fell to 22.5 per cent on Friday, according to CME Group’s Fedwatch tool.
The expiration of options on Friday likely amplified the market reaction to the report, said Dennis Dick, head of markets structure at Bright Trading LLC in Las Vegas.
“It’s been one of those days where you get a lot of chop,” he said. “This is often on the third Friday of the month. The traders are expecting this.”
The Dow Jones Industrial Average fell 68.77 points, or 0.25 per cent, to 27,154.2; the S&P 500 lost 18.5 points, or 0.62 per cent, to 2,976.61; and the Nasdaq Composite dropped 60.75 points, or 0.74 per cent, to 8,146.49.
For the week, the Dow lost 0.64 per cent, the S&P fell 1.23 per cent and the Nasdaq shed 1.19 per cent.
Earlier on Friday, US stocks had edged higher as strong results from Microsoft momentarily buoyed technology stocks. Microsoft shares ended marginally higher, up 0.1 per cent, but the S&P 500 technology index fell 0.55 per cent.
Second-quarter profits at S&P 500 companies are now estimated to rise 1 per cent, according to Refinitiv IBES data, in a reversal from earlier expectations of a small drop.
Boeing shares gained 4.5 per cent despite the plane-maker’s disclosure that it would take a $US4.9 billion ($A7 billion) after-tax hit from the grounding of its 737 MAX, indicating that investors had expected more severe repercussions.
Kansas City Southern shares rose 4.6 per cent after the railway operator posted a better-than-expected quarterly profit. Its shares helped the Dow Jones Transport index gain 0.6 per cent.
Shares of American Express slipped 2.8 per cent after the credit card issuer warned of higher operating costs this year as it spends heavily on rewards programs to attract customers.
Declining issues outnumbered advancing ones on the NYSE by a 1.29-to-1 ratio; on Nasdaq, a 1.51-to-1 ratio favoured decliners.
The S&P 500 posted 45 new 52-week highs and five new lows; the Nasdaq Composite recorded 75 new highs and 84 new lows.
Volume on US exchanges was 6.25 billion shares, compared to the 6.59 billion average for the full session over the last 20 trading days.