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Stocks sink after Fed Chair Powell pleads for patience on rate cuts

<i>From CBS</i><br/>Federal Reserve Chair Jerome Powell during a CBS
From CBS
Federal Reserve Chair Jerome Powell during a CBS "60 Minutes" interview on Sunday night.

By Krystal Hur, CNN

New York (CNN) — US stocks fell Monday after Federal Reserve Chair Jerome Powell said Sunday the central bank is not ready to cut interest rates yet.

“We want to see more evidence that inflation is moving sustainably down to 2%. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates,” he said in an interview that aired Sunday on CBS’ “60 Minutes.”

The Dow slid 275 points, or 0.7%, paring some of its losses after falling by more than 400 points earlier in the session. The S&P 500 declined 0.3% and the Nasdaq Composite lost 0.2%.

Treasury yields rose as investors continued to mull over Powell’s comments. The 10-year yield rose to 4.16%, up from Friday’s close of 4.03%, according to Tradeweb.

Powell dashed investors’ hopes for a rate cut in March at the Fed’s post-meeting press conference in January, with that optimism further waning after a shockingly strong January jobs report. Powell on Sunday doubled down on the unlikelihood of a cut next month.

“Those comments along with his statement on Wednesday … suggest that as long as inflation data comes in as it has been or better, the Fed will be cutting rates by the summer,” wrote Bespoke Investment Group analysts in a note on Monday.

The Personal Consumption Expenditures price index, the Fed’s preferred gauge for inflation, rose 2.6% annually in December. Stripping out the more volatile energy and food components, the closely watched core PCE price index climbed 2.9% from the prior year and is at its lowest point since March 2021.

While the headline PCE index is the official base for the target rate, Powell and other central bank officials often refer to core PCE inflation as it’s generally considered a better signal of where inflation is headed.

Traders now see a 17% expectation that the Fed will cut rates in March, compared to 46% a week ago. For June, financial markets are pricing in a 93% chance that the central bank will pare back rates.

Elsewhere, McDonald’s shares fell 3.7% after the fast-food chain reported mixed earnings and said that turmoil in the Middle East is hurting its business.

Boeing shares lost 1.3% after a new problem has been found during the production of 737 Max jets that will force Boeing to rework about 50 planes that have not yet been delivered.

Estee Lauder shares popped 12.1% after the cosmetics company reported a solid quarter and said it would lay off up to 5% of its employees.

Snap shares lost 1.8%, reversing earlier gains after the company said Monday that it is cutting 10% of its global headcount.

As stocks settle after the trading session, levels might change slightly.

CNN’s Alicia Wallace contributed to this report.

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