US Futures Retreat As Post-Election Rally Stalls: Markets Wrap

US futures fell after Jerome Powell signaled the Federal Reserve was in no rush to cut interest rates, and unease built over the composition of President-elect Donald Trump’s cabinet.

Contracts for S&P 500 pointed to a second day of declines on Wall Street, with Nasdaq 100 futures down 0.8%. Drugmakers Moderna Inc., Novavax Inc. and BioNTech SE came under pressure in New York premarket trading after Trump named a prominent vaccine skeptic to a top health-policy role. Domino’s Pizza was a prominent gainer after news that Berkshire Hathaway had taken a stake in the restaurant chain. 

The S&P has now ceded roughly one-third of the trough-to-peak gains notched after the US presidential election, as some of the optimism over corporate growth under Trump fades. There’s also growing acceptance that US interest rates will fall less quickly than anticipated, with recent data showing still-elevated inflation pressures and Powell confirming the Fed may take its time easing policy.

After a very strong run for trades linked to Trump’s policy pledges, “there’s been a realization that there is a price to pay for this,” said Charles-Henry Monchau, Chief Investment Officer at Banque Syz & Co. “It will come at the expense of potentially larger budget deficits, potentially larger debt and there is also the inflation dimension.”

Treasury yields advanced after October data showed retail sales were higher than estimates. Benchmark 10-year and rate-sensitive two-year notes gave up earlier gains. Powell’s remarks have pushed odds on a December rate cut to less than 60% from roughly 80% a day earlier.

The greenback eased off two-year highs but is on track for its seventh straight weekly gain. Another of the so-called Trump trades, Bitcoin, also gave up some gains. It hit a record $93,000 level earlier this week on hopes of crypto-friendly policies from the new US administration. 

Investors have poured money into US equities and crypto since the election, while pulling cash from Europe and emerging markets, according to a Bank of America note, citing EPFR Global data. However, BofA analysts advised clients to start putting money into non-US stocks, predicting monetary and fiscal policy would counter Trump’s trade tariff plans.

On Friday, Europe’s Stoxx 600 index slipped 0.5%, with vaccine makers Sanofi, GSK Plc and AstraZeneca Plc hit after Robert F. Kennedy Jr. was named to lead the Department of Health and Human Services. China’s CSI 300 Index dropped, pressured by news this week that two notable China hawks are in line for key roles in the Trump adminstration. 

“Some controversial cabinet announcements obviously do not help the market,” Mathieu Racheter, head of equity strategy at Julius Baer Group Ltd., said.

Key events this week:

• US retail sales, Empire manufacturing, industrial production, Friday

Some of the main moves in markets:

Stocks

• S&P 500 futures fell 0.5% as of 8:38 a.m. New York time.

• Nasdaq 100 futures fell 0.8%.

• Futures on the Dow Jones Industrial Average fell 0.4%.

• The Stoxx Europe 600 fell 0.5%.

• The MSCI World Index was little changed.

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%.

• The euro rose 0.3% to $1.0565.

• The British pound was little changed at $1.2655.

• The Japanese yen rose 0.5% to 155.53 per dollar.

Cryptocurrencies

• Bitcoin rose 1.5% to $89,503.07.

• Ether fell 1.1% to $3,086.36.

Bonds

• The yield on 10-year Treasuries advanced one basis point to 4.45%.

• Germany’s 10-year yield advanced two basis points to 2.36%.

• Britain’s 10-year yield was little changed at 4.48%.

• The yield on 2-year Treasuries was little changed at 4.34%.

Commodities

• West Texas Intermediate crude fell 0.4% to $68.35 a barrel.

• Spot gold rose 0.1% to $2,568.46 an ounce.