U.S. stocks retreated from record highs on Friday as euphoria over interest rate cuts faded, with FedEx (FDX) earnings providing a reality check.
The S&P 500 (^GSPC) fell about 0.2% after the benchmark index closed at an all-time high. The Dow Jones Industrial Average (^DJI) was slightly lower after hitting a record close. Leading the declines were contracts on the technology-heavy Nasdaq Composite (^IXIC) down 0.3%.
Stocks rose on Thursday as investors embraced Federal Reserve Chairman Jerome Powell’s message that the Fed cut interest rates aggressively to support the economy, not save it — a notion reinforced by the jobless claims data.
But that massive rally is now faltering amid reminders that risks to growth may still exist. Wall Street is still wondering whether the Fed is too late to keep the economy on track for a “soft landing.” Traders are pricing in deeper cuts this year than policymakers had projected, according to Fed funds futures.
Read more: What the Fed’s rate cut means for bank accounts, CDs, loans, and credit cards
The Fed-fueled bullish sentiment also increases the risk of a bubble, according to Bank of America’s senior strategist. Michael Hartnett said stock prices are currently driven by policy easing and earnings growth, which is what’s driving investors to chase gains.
FedEx Corp. reported a sharp drop in after-hours earnings Thursday, missing Wall Street estimates. The delivery company, a bellwether for the economy, saw its shares drop 14%.
Elsewhere, Nike (NKE) shares jumped after the sportswear maker named a new CEO at a time when its sales are under pressure.
“Web maven. Infuriatingly humble beer geek. Bacon fanatic. Typical creator. Music expert.”
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