US stocks sank on Friday, recording steep weekly losses as investors absorbed Chair Jerome Powell's signal that the Federal Reserve won't hurry to make interest-rate cuts. The S&P 500 dropped 1.3%, the Dow Jones Industrial Average slid 0.7%, and the tech-heavy Nasdaq Composite led declines, falling 2.2%. Powell's hawkish comments are casting a pall on markets as the initial optimism for President-elect Donald Trump's policies starts to wear off.

Fading Trump Bump and a Hawkish Fed Weigh on Wall Street

Reversing the Post-Election Rally

The S&P 500 has already reversed one-third of its post-election rally, and the Nasdaq logged a weekly loss of over 3%. This reversal comes as investors grapple with the implications of Powell's comments, which suggest the Fed is in no rush to cut interest rates. The central bank's hawkish stance is a stark contrast to the initial optimism that had gripped the markets following Trump's victory, as investors anticipated a pro-business agenda and potential tax cuts.

Retail Sales Resilience Fails to Lift Sentiment

Despite the resilience in the American consumer, as evidenced by the better-than-expected October retail sales data, the markets remained downbeat. The 0.4% month-on-month increase in retail sales, including a revision higher for September's reading, was a sign of the economic strength that Powell suggested would allow the Fed to take its time in adjusting monetary policy.

Uncertainty Surrounding the Fed's Path

Wall Street is now back to puzzling over the Fed's path next year, a question already muddied by the recent inflation prints. Traders are pricing in a 62% chance of a rate cut at the Fed's December policy meeting, down from 72% the day before, according to the CME FedWatch tool. Bets on a January easing stand at 74%, down from the previous 81%. This volatility in market expectations reflects the uncertainty surrounding the central bank's future actions.

Trump's Influence on the Markets

Investors are also keeping a close eye on Trump's preparations for power, particularly after vaccine stocks fell amid reports that Robert F. Kennedy Jr. will be named the top health official. The potential appointment of the vaccine skeptic has raised concerns about the future of the industry. Meanwhile, JPMorgan Chase CEO Jamie Dimon made it clear that he won't be joining the new president's team, further adding to the uncertainty surrounding the incoming administration's economic policies.

Navigating the Shifting Landscape

As the markets grapple with the shifting landscape, investors will need to carefully navigate the evolving dynamics. The Fed's hawkish stance, the fading optimism around Trump's policies, and the potential changes in the healthcare sector are all factors that will shape the market's trajectory in the coming weeks and months. Staying informed and adaptable will be crucial for investors as they navigate this uncertain environment.