Written by Chuck Mikolajczak
NEW YORK (Reuters) – U.S. stocks edged lower on Friday, as investors held back after a strong rally in the previous session spurred by interest rate cuts by the Federal Reserve.
After seeing their biggest daily gains since mid-August, the Dow and the Dow delayed to record highs and, along with the Nasdaq, were poised for weekly gains of at least 1%.
Stocks partially pared losses after comments by Federal Reserve Governor Christopher Waller raised expectations that the central bank will cut interest rates by 50 basis points at its November meeting, having just dropped 50 bps on Wednesday.
Another Governor Michelle Bowman, however, insisted that a smaller Fed cut this week was optional.
“The market is still trying to readjust because, yes, there were some market participants who may have expected 50 basis points but a lot of people didn't,” said Sid Vaidya, chief US wealth strategist at TD Wealth in New York.
“You have to be selective and moderate just because we expect growth to slow down a bit and ratings, especially in large cap growth, are a little bit stretched so you want to be selective.”
It fell 93.70 points, or 0.22%, to 41,931.84, the S&P 500 lost 28.24 points, or 0.49%, to 5,685.40 and 109.51 points, or 0.61%, to 17,904.48.
Markets are pricing in a cut of at least 25 bps in November, with expectations for a cut of 50 bps given a 48.9% chance, according to CME's FedWatch tool.
Nine of the S&P's 11 major sectors were lower, with industrials the worst performer.
Utilities rallied, however, led by a 21.58% jump in Constellation Energy after the company signed a data center deal with Microsoft (NASDAQ: ) to help revive a nuclear power plant unit at Three Mile Island in Pennsylvania.
The Fed began its easing cycle on Wednesday and heralded a period of sustained economic growth and low unemployment and inflation.
Options and futures linked to stock indexes and individual stocks will expire at the same time on Friday in an event known as the “triple witching,” which could exacerbate the day's volatility.
FedEx (NYSE: ) fell 13.92% after lowering its full-year revenue forecast, sending the Dow Jones Transport index down 3.39%.
Nike (NYSE: ) jumped 5.55% after former CEO Elliott Hill will rejoin the company to replace John Donahoe as CEO.
Historically, equities have performed well in a bearish environment. However, the outlook appears bleak with the S&P 500 trading higher than its long-term average.
Bearish issues outnumbered advancers by a 2.06-to-1 ratio on the New York Stock Exchange and by a 2.18-to-1 ratio on the Nasdaq.
The S&P 500 posted a new 52-week high and one new low while the Nasdaq Composite recorded a new high of 82 and a new low of 86.
