US Stocks Have Already Reversed a Third of Post-Election Rally

(Bloomberg) - A pullback in the S&P 500 that's already trimmed about a third off the index's post-election rally is set to continue Friday, as sticky inflation and hawkish comments from the Federal Reserve weigh on sentiment.

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S&P 500 futures were down 0.6% as of 4:28 a.m. in New York, extending Thursday's decline. Contracts tracking the Nasdaq 100 dropped 0.9%, while those tied to the Dow Jones Industrial Average fell 0.3%.

Since hitting a record intraday high on Monday, the S&P has given back roughly one-third of the trough-to-peak gains in the aftermath of the US presidential election. Initial optimism over corporate growth under President-elect Donald Trump has started to fade as traders pare bets on rate cuts. Fed Fund Futures are pricing in a 63% chance of a 25-basis-point cut in December, down from the 83% priced on Wednesday.

Fed Chair Jerome Powell said on Thursday that the central bank isn't in a hurry to lower rates given signs of strength in the US economy. His comments came after data showed that factory-gate prices picked up, initial jobless claims stayed subdued while consumer inflation remained firm.

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While Thursday's PPI data weren't that alarming by the standards of price rises during the 2022-2023 period, "the problem was it showed inflation remaining stubbornly above levels consistent with the Fed's target," said Deutsche Bank strategists led by Henry Allen. The PCE price gauge — due two weeks later — will now be key to watch, they said.

Stocks in focus on Friday include chip-equipment maker Applied Materials Inc., which slid in postmarket trading after giving a cautious outlook amid a downturn in most parts of the semiconductor industry. Shares of vaccine manufacturers may also be on the move after Trump tapped Robert F. Kennedy Jr. to run the Department of Health and Human Services.

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