Stocks have broadly slowed their roll since screaming 26 per cent higher from November through March. Worries are rising that a remarkably resilient US economy could prevent the Federal Reserve from delivering as many cuts to interest rates this year as earlier hoped. Critics have also been saying at least a pullback was overdue after stock prices had grown expensive by several measures.
The Fed has indicated it may still cut its main interest rate three times this year, which would relieve pressure on the economy. But Fed officials say they will do so only if more evidence arrives to show inflation is heading down toward their goal of 2 per cent.
Chair Jerome Powell reiterated that message in a speech, spelling out the risks of cutting rates either too early or too late. “Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy,” he said.
Markets took encouragement from a report on Wednesday morning showing growth in construction, retail and other US services businesses cooled last month. The report from the Institute from Supply Management also said an index of prices paid was at its lowest level since March 2020, an encouraging trend for inflation.
That calmed Wall Street’s nerves following a report earlier in the morning that markets found more discouraging. It suggested stronger gains than expected in hiring within the private sector. That report from the ADP Research Institute said employers accelerated their hiring last month, when economists were forecasting a slowdown.
A more comprehensive report on the job market for March will arrive from the US government on Friday, and it will likely be the week’s headline economic data.
Loading
In the bond market, Treasury yields fell. The 10-year yield slipped to 4.34 per cent from 4.36 per cent late Tuesday. The two-year yield, which more closely tracks with expectations for Fed action, fell to 4.67 per cent from 4.70 per cent.
In stock markets abroad, European indexes were modestly higher. A report showed inflation in Europe cooled by more than expected in March, but analysts say that might not be enough to move up the European Central Bank’s first cut to interest rates.
With AP