Labor market data also surprised to the upside. Weekly jobless claims fell to 220,000, below the expected 230,000, signaling continued strength. Continuing claims edged lower to 1.87 million.
Fed’s Hawkish Tone Weighs on Sentiment
The Federal Reserve’s revised forecast of only two rate cuts in 2024, down from four previously anticipated, fueled Wednesday’s selloff. Although the Fed trimmed rates by 25 basis points to a range of 4.25%–4.5%, Fed Chair Jerome Powell emphasized a cautious approach to future adjustments. Treasury yields climbed in response, with the 10-year yield hitting 4.566% on Thursday.
Powell’s comments reinforced the Fed’s commitment to combating inflation while maintaining a strong labor market, yet markets remain wary of high valuations and the broader economic impact of persistent rate uncertainty.
Market Forecast: Where Could Stocks Be Headed Next?
The short-term outlook appears cautious as investors digest the Fed’s stance and elevated valuations. Defensive sectors may continue to attract attention, while growth stocks could remain under pressure.
Treasury yields are likely to stay elevated, adding pressure to equities. Despite Thursday’s rebound, broader indexes could face renewed selling as traders adjust portfolios for 2024. A bearish bias may persist into year-end unless clear signs of monetary policy easing emerge.
More Information in our Economic Calendar.