Stocks took a breather ahead of the Thanksgiving holiday as tariff threats and a mixed reading on the Fed's preferred inflation gauge clouded the picture for rate policy in the year ahead. Mega-cap tech stocks driving the bulk of the bull market's gains led equities lower, hurt by disappointing results from two big PC manufacturers.
Markets failed to build on record highs by advancing for a seventh consecutive session on Wednesday, as a slew of economics reports suggested the Federal Reserve's gradual pace of quarter-point cuts to the short-term federal funds rate may have to be rethought.
"A one-two punch of hawkish trade rhetoric from President-elect Trump and accelerating PCE inflation is bumping up equity market volatility today," writes José Torres, senior economist at Interactive Brokers. "The Fed's preferred price pressure gauge is moving away from the central bank's target just as protectionist proposals threaten to hit consumers with higher costs for goods."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Economics in focus
Market participants hoping for a more dovish stance on monetary policy had a mixed reaction to the latest inflation data. The Fed's preferred measure of consumer prices – the Personal Consumption Expenditures Price Index (PCE) – showed that inflation came in a bit hot last month.
PCE inflation increased 0.24% in October, up from 0.18% in September, according to the Bureau of Labor Statistics. On an annual basis, inflation increased 2.3% in October. Most importantly, core PCE, which strips out volatile food and energy costs, rose 2.8%. That was ahead of estimates as well as the Fed's 2% inflation target.
"Today's data shouldn't change views of the likely path for disinflation, however bumpy," notes David Alcaly, lead macroeconomic strategist at Lazard Asset Management. "But a lot of observers, probably including some at the Fed, are looking for reasons to get more hawkish on the outlook given the potential for inflationary policy change like new tariffs."
Although a quarter-point cut remains in play at the next Fed meeting, "further rate cuts in 2025 are fading as policy gets closer to neutral," says David Russell, global head of market strategy at TradeStation. "Inflation is fading as an issue as investors shift to cyclical growth."
At the closing bell, the blue chip Dow Jones Industrial Average slid 0.3% to 44,722, while the broader S&P 500 shed 0.4% to 5,998. The tech-heavy Nasdaq Composite fell 0.6% to end at 19,060. Tech stocks, consumer discretionary names and industrials were among the sector laggards, while real estate, healthcare and consumer staples caught a bid.
Stocks in focus
Disappointing quarterly results from Dell (DELL) and HP (HPQ) showed persistently sluggish demand in the market for personal computers and related tech products. The industry, which is still recovering from a post-pandemic slump, is counting on AI to lift its fortunes.
Lamentably, these endeavors have yet to bear fruit.
Shares in Dell declined 12.2% after the company late Tuesday gave a fourth-quarter revenue forecast below analysts' expectations. Weak demand for PCs and increased competition in its server business were to blame.
DELL stock was up about 88% for the year to date thanks to magical thinking about the potential for AI, but as Chief Operating Officer Jeff Clark told investors on Dell's earnings call, "[The AI] business will not be linear, especially as customers navigate an underlying silicon roadmap that is changing."
Meanwhile, over at HP, shares retreated 11.4% after the PC maker likewise gave an outlook that cast doubt on demand for artificial intelligence-enabled PCs.
The results from DELL and HPQ helped spark a selloff in the broader tech sector, with semiconductor stocks Broadcom (AVGO, -3.1%), Micron Technology (MU, -3.5%) and Intel (INTC, -1.7%) among the standout laggards.
Related content
- Stock Picks That Billionaires Love
- Best Blue Chip Stocks: 21 Hedge Fund Top Picks
- Stocks With the Highest Dividend Yields in the S&P 500
-
Stocks Can't Hold Meta, Microsoft Gains: Stock Market TodayThe main indexes all opened higher Thursday on impressive Big Tech earnings, but momentum faded into the close.
-
Retirement Health Care Costs Are On the Rise: What You Need to KnowA 65-year-old retiree will face significantly higher lifetime health care costs than they would have a year ago, even with Medicare. Here are the surprising totals.
-
Stocks Can't Hold Meta, Microsoft Gains: Stock Market Today
The main indexes all opened higher Thursday on impressive Big Tech earnings, but momentum faded into the close.
-
Three Ways to Find Deals in Your Investments This YearLooking for ways to save because of tariffs? Don't forget to look for deals in your investments. Here are three expert tips for making a little extra this year.
-
How to Invest for a Fall Interest Rate Cut by the FedA lot can happen between now and then, but the probability the Fed cuts interest rates before the end of the year is better than 85%.
-
You Don't Have to Be Wealthy to Need a Wealth ManagerNavigating complex financial decisions is hard on your own, no matter how much money you have. A wealth manager can provide comprehensive financial planning, investment management, risk management and more.
-
Despite Tariffs, These Investment Experts Are Bullish on European EquitiesEuropean equities were one of the better-performing investments during the first half of 2025. They could be a good long-term prospect for U.S. investors needing to diversify, according to these investment managers.
-
Stocks Are Up and Down on Fed Day: Stock Market TodayIn another sign of changing times, JPMorgan has partnered with Coinbase to enable cryptocurrency purchases with credit cards.
-
What Federal Interest Rates Mean for Your Grocery BillThe relationship between grocery prices and the Federal Reserve has plenty of back-and-forth. Understand how they interplay.
-
5 Undervalued Stocks to Buy NowThere are plenty of high-quality undervalued stocks to buy right now, you just need to know where to look. Here, we highlight five of our top picks.
