Markets Adjust as Powell’s Cautious Tone Raises Uncertainty Over Rate Reductions, Boosting Defensive Strategies

Stocks experienced a steep decline after Federal Reserve Chair Jerome Powell remarked that “equity prices are fairly highly valued,” a comment that many investors took as a warning about possible overvaluation and the chance of tighter monetary policy. The S&P 500 dropped by 0.55% for the session, while the Nasdaq Composite slid nearly 1%, with technology shares leading the downturn. Powell, speaking in Rhode Island, stressed that financial conditions remain elevated, though he also stated the Fed does not currently see “elevated financial stability risks.” Despite this, investors responded with caution, worried that the Fed might slow its pace of rate cuts due to inflation and concerns about the economy’s strength Markets are selling off after the Fed’s Powell said six ... - Fortune [ 1 ] Fed Chief Powell says stock prices appear 'fairly highly valued' [ 2 ].

The downturn was fueled by renewed doubts about whether recent market gains, especially in technology, can be sustained.

shares slid 2.8% after a $100 billion investment in OpenAI raised concerns about circular funding and the energy demands of AI growth. Deutsche Bank analysts pointed out that the deal left investors with more questions than answers, while Paul Donovan of UBS suggested Powell’s remarks were intended to cool investor enthusiasm. The broader Nasdaq decline reflected a more cautious mood, with Oracle and Amazon also losing ground as the AI-driven rally faded Markets are selling off after the Fed’s Powell said six ... - Fortune [ 1 ] US stock market retreats after record highs as Powell warns of … [ 4 ].

Global markets echoed the U.S. selloff, though Asian stocks bucked the trend. The STOXX Europe 600 and the U.K.’s FTSE 100 slipped 0.28% and 0.12%, respectively, while Japan’s Nikkei 225 climbed 0.3% and China’s CSI 300 advanced 1.02%. U.S. futures initially recovered slightly, but volatility remained the dominant theme. Powell’s address described the economic outlook as “challenging,” with inflation risks tilted upward and ongoing labor market pressures. He cautioned that the Fed may have to keep rates “restrictive for longer than markets anticipate,” highlighting the prevailing uncertainty Markets are selling off after the Fed’s Powell said six ... - Fortune [ 1 ] Powell Speech Market Selloff - TraderInsight [ 3 ].

Sector shifts showed a move toward safer assets. Utilities, healthcare, and consumer staples outperformed as investors sought stability, while financials saw mixed results. Bond yields jumped, with the 2-year Treasury yield surging as traders dialed back expectations for imminent rate cuts. The dollar gained strength, putting additional pressure on commodities and emerging markets. TraderInsight described the market’s “recalibration” as participants adjusted to a more cautious Fed, with defensive sectors such as XLV (healthcare) and XLP (consumer staples) showing relative resilience Powell Speech Market Selloff - TraderInsight [ 3 ].

Looking forward, investors are focused on Friday’s release of the Fed’s preferred inflation measure, the PCE index, which could shape expectations for future rate moves. Powell’s statements have dampened hopes for aggressive easing, with futures markets now anticipating about two 25-basis-point cuts by year-end—much less than previously expected. Analysts at Goldman Sachs and UBS remain optimistic about gold, forecasting prices could reach $4,000 per ounce by mid-2026, reflecting continued demand for safe-haven assets amid policy uncertainty US stock market retreats after record highs as Powell warns of … [ 4 ].