NEW YORK (Reuters) - Wall Street’s main indexes fell on Friday following a report that the Federal Reserve plans to cut interest rates by only a quarter-percentage point at the end of the month.
The benchmark S&P 500 erased earlier marginal gains after a Wall Street Journal report on the Fed’s plans. According to the report, while the U.S. central bank is not prepared to make a bigger 50-basis-point cut, it may make further rate cuts in the future given concerns about a decline in global economic growth and uncertainty about trade.
On Thursday, stocks had risen as comments from New York Fed President John Williams increased hopes of a bigger rate cut. Later that day, however, a New York Fed representative said Williams’ comments were not intended to telegraph any hints about upcoming Fed policy actions.
“It appears that the Fed has communicated its message,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama. “They’re basically trying to clarify their policy.”
Futures market odds of a 50-basis-point cut at the Fed’s July meeting soared to 71% late Thursday immediately after Williams’ speech but fell to 22.5% on Friday, according to CME Group’s Fedwatch tool.
The expiration of options on Friday likely amplified the market reaction to the report, said Dennis Dick, head of markets structure at Bright Trading LLC in Las Vegas.
“It’s been one of those days where you get a lot of chop,” he said. “This is often on the third Friday of the month. The traders are expecting this.”
The Dow Jones Industrial Average .DJI fell 68.77 points, or 0.25%, to 27,154.2, the S&P 500 .SPX lost 18.5 points, or 0.62%, to 2,976.61 and the Nasdaq Composite .IXIC dropped
