Fed signals quarter-point rate cut is likely at end of July as Trump demands interest is slashed – but stocks slump in disappointment that cut won’t be steeper
- Analysis of Fed statements indicates a quarter-point rate cut in July
- But investors were disappointed that the rate cut won’t be half a point
- Trump blasted New York Fed president for not easing rates further
- Said the central bank ‘must stop with the crazy quantitative tightening’
Stocks have slumped after Federal Reserve officials signaled that a quarter-point rate cut is likely at the July meeting, disappointing investors and President Donald Trump, who has demanded more drastic action.
The benchmark S&P 500 erased earlier marginal gains on Friday afternoon, falling 18.5 points, or 0.62 percent, to 2,976.61, after a Wall Street Journal report on the Fed’s plans.
According to the report, while the U.S. 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.
Trump blasted New York Fed President John Williams (left) on Friday after Fed officials dampened hopes that William’s remarks signaled a 50 basis-point rate cut in July
‘I like New York Fed President John Williams first statement much better than his second,’ Trump tweeted on Friday morning in response to the reversal.
‘His first statement is 100% correct in that the Fed ‘raised’ far too fast & too early. Also must stop with the crazy quantitative tightening,’ he continued.
‘We are in a World competition, & winning big, but it is no thanks to the Federal Reserve. Had they not acted so fast and ‘so much,’ we would be doing even better than we are doing right now,’ Trump wrote.
‘This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don’t blow it!’
Futures market odds of a 50-basis-point cut at the Fed’s July meeting soared to 71% late Thursday immediately after Williams’ speech but fell to 22.5% on Friday, according to CME Group’s Fedwatch tool.
This chart shows the effective federal funds rate from 1995 to present
The Dow Jones Industrial Average fell 68.77 points, or 0.25 percent, to 27,154.2 and the Nasdaq Composite dropped 60.75 points, or 0.74 percent, to 8,146.49.
For the week, the Dow lost 0.64 percent, the S&P fell 1.23 percent and the Nasdaq shed 1.19%.
Earlier on Friday, U.S. stocks had edged higher as strong results from Microsoft Corp momentarily buoyed technology stocks. Microsoft shares ended marginally higher, up 0.1 percent, but the S&P 500 technology index fell 0.55%.
Second-quarter profits at S&P 500 companies are now estimated to rise 1 percent, according to Refinitiv IBES data, in a reversal from earlier expectations of a small drop.
A one-day view of the Dow Jones shows the index erasing gains late in the day on Friday
Traders work on the floor of the New York Stock Exchange on Friday
Boeing Co shares gained 4.5 percent, despite the planemaker’s disclosure that it would take a $4.9 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 percent after the railroad operator posted a better-than-expected quarterly profit. Its shares helped the Dow Jones Transport index gain 0.6%.
Shares of American Express Co slipped 2.8 percent 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 favored 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.