Wed Nov 20 21:15:45 UTC 2024: **Stock Market Rally Stalls Amid Inflation Concerns and Fed Commentary**

**NEW YORK** – The post-election surge in the stock market abruptly ended last week, with major indices experiencing significant declines. The S&P 500 fell over 2%, the Dow Jones Industrial Average dropped more than 500 points (nearly 1.3%), and the Nasdaq Composite plummeted over 3%. This downturn was attributed to two robust inflation reports and comments from Federal Reserve Chair Jerome Powell, which fueled uncertainty about the Fed’s future interest rate trajectory. Investor enthusiasm over potential policy changes under the new administration was overshadowed by these concerns.

This week, investors will closely monitor several economic data releases, including services and manufacturing sector activity and consumer sentiment figures. However, the focus will shift to corporate earnings, with several major companies reporting, including AI leader Nvidia (NVDA), Walmart (WMT), Target (TGT), BJ’s (BJ), and Deere & Company (DE). Nvidia’s results, in particular, are highly anticipated given its significant weight in the S&P 500 and its strong performance this year.

The recent rise in bond yields, following the Federal Reserve’s September rate cut, also contributed to the market’s decline. The 10-year Treasury yield rose sharply after the election, reaching near 4.5%. While higher rates usually signal strong economic growth, which is typically positive for stocks, the recent inflation data countered this positive interpretation.

The core Consumer Price Index (CPI) and core Producer Price Index (PPI) both showed persistent inflation in October, exceeding expectations. Chair Powell’s statement that the Fed is not in a hurry to lower rates further dampened market sentiment. This led to a decrease in market expectations for rate cuts, with the probability of a 25 basis point cut in December falling from 86% to 58%.

Despite the recent market volatility, S&P 500 companies have reported solid third-quarter earnings, showing a 5.4% year-over-year increase, marking the fifth consecutive quarter of growth. However, some sectors, like small-cap stocks, have seen a reversal of post-election gains, indicating uneven market performance. Analysts cite lingering policy uncertainty and high growth expectations as contributing factors to the profit-taking seen in recent weeks.

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