Wall Street was worried about Fed concerns
A trader works, as a screen shows a press conference with Federal Reserve Board Chairman Jerome Powell after the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, US, January 31, 2024 .
Brendan McDermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open gives investors access to everything they need to know, wherever they are. Like what you see? You can subscribe here.
What you need to know today
Wall Street is going backwards
US stocks lost ground on Monday and Treasury yields rose amid lingering concerns that the Federal Reserve may not cut rates as much as expected. The blue-chip Ink dropped more than 200 points. The S&P 500 it also fell after last week’s high. The Nasdaq Composite also fell by 0.2%.
Oil supply decline
The oil market is facing a supply crisis by the end of 2025 because the world is not replacing crude reserves fast enough, according to Occidental CEO Vicki Hollub. About 97% of the oil produced today was discovered in the 20th century, she told CNBC.
Palantir is on the rise
Palantir shares rose 19% in extended trading after the company reported revenue that topped analysts’ estimates. In a letter to shareholders, Palantir CEO Alex Karp said demand for large language models in the US “continues to be stagnant.”
Red Sea Diseases
Higher shipping costs due to tensions in the Red Sea could hamper the global fight against inflation, the Organization for Economic Co-operation and Development said. Clare Lombardelli, chief economist at the OECD, told CNBC that shipping-driven inflationary pressures remain a threat rather than its underlying issue.
[PRO] Banking reference
The banking sector offers attractive opportunities despite increased volatility, according to fund manager Cole Smead. “It’s the banks that made bad decisions that do [other] banks look attractive in pricing,” Smead told CNBC, who picked two bank stocks that are in play.
The bottom line
Investors are once again getting ahead of themselves on the Fed’s next move.
Markets were rattled after Federal Reserve Chairman Jerome Powell reiterated that the central bank is unlikely to be in a rush to lower interest rates.
Wall Street has been parsing his hawkish comments, but what Powell said over the weekend was essentially no different than what he said at Wednesday’s press conference: that he wants to see more evidence that inflation coming down to a sustainable level.
However, the debate about the timing of rate cuts worries Fed watchers.
This prompted selling fueled by higher bond yields. The result of the 10-year Finance Department changed so far +4.163% compared to yesterday. Typically, higher yields tend to indicate that investors believe the Fed will take longer to cut rates.
New data on Monday didn’t help either. A new survey showed that the US services sector expanded at a faster rate than expected in January.
This in addition to the successful jobs report released on Friday, fueled investors’ concerns that rates could stay much longer.
Wall Street will now look forward to the Fed speakers this week. They may shed more light on the path for rate cuts.