Nov 27 (Reuters) - Wall Street's main indexes closed lower on Wednesday, with the Nasdaq leading declines, as technology stocks slumped on Thanksgiving eve on worries the Federal Reserve may be cautious about rate cuts after stubbornly strong U.S. inflation data.
Data showed consumer spending increased solidly in October, suggesting the U.S. economy maintained its strong pace of growth, but progress on lowering inflation appeared to have stalled.
Traders added to bets the Fed will lower borrowing costs by 25 basis points at its December meeting, according to CME's FedWatch. However, they anticipate the central bank leaving rates unchanged at its January and March meetings.
Investors were still gauging the impact of President-elect Donald Trump's pledge on Monday to impose duties of 25% on imports from Mexico and Canada and 10% on Chinese goods unless they halt flows of the deadly opioid fentanyl and illegal migrants into the U.S.
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Goldman Sachs said in a note this week an escalation in tariff policy risks delaying the return to 2.0% inflation target.
According to preliminary data, the S&P 500 (.SPX), lost 22.85 points, or 0.38%, to end at 5,998.78 points, while the Nasdaq Composite (.IXIC), lost 113.80 points, or 0.59%, to 19,061.78. The Dow Jones Industrial Average (.DJI), fell 136.31 points, or 0.31%, to 44,723.23.
Dell (DELL.N), and HP(HPQ.N), slumped after downbeat quarterly forecasts, weighing on the Information Technology sector (.SPLRCT), which led sectoral declines.
Traders work on the floor of the NYSE in New York
Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., November 22, 2024. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights, opens new tab
The sentiment spread to megacaps such as Nvidia (NVDA.O), and Microsoft (MSFT.O), while the Philadelphia SE Semiconductor Index (.SOX), ended lower.
The Russell 2000 index (.RUT), was sluggish after hitting a record high earlier in the week.
Investors also assessed data earlier in the day which showed the economy grew at a solid clip in the third quarter. Weekly jobless claims fell again last week, leaving the door open for another rate cut from the Fed in December.
"Inflation has proven to be a little stickier than the Fed would have liked, which may give them pause with respect to cutting rates," said Scott Welch, chief investment officer at Certuity.
"There are questions around the effects of Trump's stated tariff policy, which, if implemented could be pretty inflationary and so the Fed is going to have to balance itself between the economic data and the incoming administration's policy agenda."
Minutes from the Fed's November meeting, released on Tuesday, showed policymakers were uncertain about the outlook for interest-rate cuts and how much the current rates were restricting the economy.
The benchmark S&P 500 is on track for its biggest one-month rise in a year and its sixth month of gains out of seven, as markets price in the probability of Trump's policies benefiting local businesses and the overall economy.
Among others, Workday (WDAY.O), slipped after forecasting fourth-quarter subscription revenue below expectations, hit by weaker client spending on its human capital management software.
Reporting by Johann M Cherian and Purvi Agarwal in Bengaluru and Saeed Azhar in Toronto; Editing by Pooja Desai and David Gregorio
