Stock Market Update

[BRIEFING.COM] Stocks beat a hasty retreat after Fed Chair Powell suggested the Fed could cut rates by a lesser amount this year than the market expects. Specifically, the Fed Chair said in a speech to the NABE that, if the economy evolves as expected, that would mean two more cuts this year of 25 basis points each. He added that the Fed could move faster, or slower, based on economic data.

The fed funds futures market had been pricing in the likelihood of 75 basis points worth of rate cuts before the end of the year, but the probability of a 50-basis points cut in November has been slashed to 34.7% today from 53.3% on Friday, according to the CME FedWatch Tool.

A broad-based retreat in the stock market coincided with a pop in Treasury yields to highs for the session. The 2-yr note yield is up nine basis points to 3.65% and the 10-yr note yield is up five basis points to 3.80%.

The major indices, however, have already recovered a sizable portion of the "Powell dip," heartened most likely by the realization that the Fed will still be cutting rates and will move faster to cut rates if necessary, keeping the so-called Fed put (i.e., a belief the Fed will be aggressive in providing policy accommodation to stem any material decline in stock prices that upsets the smooth functioning of the financial system) very much in play in the market's mind.

The S&P 500 had been down as much as 0.6% immediately following Mr. Powell's remarks, and is now down 0.2%.