U.S. Stock Index Futures Decline After Powell's Remarks

(Reuters) – U.S. stock index futures fell on Friday after Federal Reserve Chair Jerome Powell stated there is no immediate need to reduce interest rates. This led to increased bond yields, thereby pressuring rate-sensitive equities.

In his Thursday speech, Powell highlighted ongoing economic growth, a strong job market, and inflation exceeding the Fed's 2% target as reasons for the Fed's cautious approach regarding future rate cuts.

Following Powell's comments, U.S. Treasury yields saw a broad increase, while Wall Street's main indexes closed lower. Quincy Krosby, chief global strategist for LPL Financial, stated, "Fed Chair Powell telegraphed news that markets didn't want to hear… the Fed cannot yet declare victory in its campaign to quell inflation."

Traders have increased speculation that the Fed will maintain current rates at its December meeting, pricing in a 37.6% chance, up from 14% a month ago, based on the CME FedWatch tool. Expectations now point to approximately 73 basis points of easing by the end of 2025, according to LSEG calculations.

All three major U.S. stock indexes are on track for weekly losses, with a prior post-election rally losing momentum as the market redirects focus toward the economy's state and potential inflation risks stemming from a possible second Trump presidency.

Shares of vaccine manufacturers experienced declines after the President-elect appointed Robert F. Kennedy Jr., known for spreading vaccine misinformation, to lead the Department of Health and Human Services. BioNTech, Moderna, and Novavax each dropped over 2% in premarket trading, while Pfizer dipped 0.4%.

At 5:30 a.m. ET, Dow E-minis were down 205 points (0.47%), S&P 500 E-minis fell 38.5 points (0.64%), and Nasdaq 100 E-minis dropped 185.5 points (0.88%). Futures for the rate-sensitive Russell 2000 decreased by 0.3%.

Major tech stocks also declined, with Nvidia edging lower by 0.5%, Apple dropping 1%, and Alphabet down by 0.6%.

Powell's statements came after new data this week showed persistent inflation in both consumer and producer prices. On Friday, the October retail sales data, due at 8:30 a.m. ET, will provide further insight into consumer behavior amid rising prices. Additional reports on import/export prices and industrial production will be released throughout the day, accompanied by remarks from New York Fed President John Williams.