A rate cut in December is "far from a foregone conclusion", Powell said. Stocks in the U.S. fell

All three major U.S. stock indices went from the growth they were showing after the publication of the Fed's rate decision to falling. The S&P 500, for example, was falling at the moment by almost 0.6%, although it then cut its losses. Investors took negatively the words of Fed chief Jerome Powell that a rate cut at the December meeting was "far from a foregone conclusion". The market was hoping for the continuation of monetary policy easing.

The S&P 500 index was down about 0.57% in trading on October 29. The blue-chip index Dow Jones Industrial Average lost about 0.5%, and the Nasdaq Composite - by 0.3%. After that, the securities partially recovered their losses: the Nasdaq, in which technology companies have a large weight, even managed to return to growth by about the same 0.3%.

The yield on government bonds of the U.S. Ministry of Finance also increased sharply. Thus, for two-year treasuries it added 10 basis points and reached 3.59%, and for ten-year - 9 b. p. and amounted to 4.05%, reported Seeking Alpha.

Continued interest rate cuts by the U.S. Federal Reserve at its December meeting are "far from a foregone conclusion," Fed Chairman Jerome Powell said at a press conference as quoted by Bloomberg. In September, the regulator predicted that further monetary policy easing could follow at the October and December meetings. But now Powell's words reduce investors' appetite for risk, Bloomberg writes.

The Fed chief said the regulator's rate meeting on October 28-29 expressed "widely divergent views." "The conclusion from that is that we haven't made a decision on December, and we will look at the data available to us as it affects the outlook and the balance of risks," Powell said (quoted by Bloomberg).

"While the Fed may not cut rates at every meeting (although we believe it will), the statement can rather be seen as an attempt to preserve room for maneuver. The market will perceive it as hawkish, although this may not prove true in reality," said Bloomberg Intelligence analyst Ira Jersey.

Wednesday's decline in stock indexes could open up a buying opportunity for equities, suggested Northlight Asset Management chief investment officer Chris Zaccarelli, as quoted by CNBC. "The recent news - a rate cut and the end of quantitative tightening (and the start of automatic bond purchases) - is positive for stocks and bonds. However, markets were expecting this and were unpleasantly surprised that future rate cuts may be off the table," Zaccarelli noted.

After Powell's statements, traders reduced the probability of a rate cut in December, Barron's reports. It now stands at 63.4%, according to CME Group's FedWatch tool. About a third think the rate will remain unchanged. Before the Fed meeting, the chance of monetary easing in December was estimated at 91%, Barron's added.

Prior to the Fed's announcement of a 0.25 percentage point interest rate cut and Powell's press conference, all three indexes were rising and even hit all-time records.

The Fed lowered the rate to a range of 3.75% to 4%. Ten members of the Federal Open Market Committee voted for it. Two were against: Governor Stephen Miran proposed to lower the rate immediately by 0.5 p. p., and the president of the Reserve Bank of Kansas City Jeffrey Schmid - to leave it unchanged.

In addition, the Fed announced that it will end its balance sheet reduction program (aka quantitative tightening) effective December 1.

This article was AI-translated and verified by a human editor