NEW YORK (AP) — U.S. stocks fell toward their worst loss since Election Day on Friday, as the substantial boost Wall Street received last week from Donald Trump’s victory and the Federal Reserve’s rate cut continued subsides.
The S&P 500 fell 1.4%, heading for a losing week and its worst day since October. The Dow Jones Industrial Average was down 381 points, or 0.9%, as of 12:32 p.m. Eastern time, and the Nasdaq Composite was 2.2% lower.
Vaccine makers helped drive the market lower after President-elect Donald Trump said he wanted to make Robert F. Kennedy Jr., a prominent anti-vaccine activist, his Secretary of Health and Human Services. Moderna plunged 9.8% and Pfizer fell 4.8% on concerns about a possible profit decline.
Kennedy still needs Senate confirmation to get the job, and some analysts are skeptical about his chances because of his views on vaccines and his criticism of the pharmaceutical industry.
“But if Kennedy is confirmed, it will be difficult to weigh risks for investors because his views are so far outside the traditional orthodoxy of Republican health policy,” Raymond James analyst Chris Meekins wrote in a research note. Meekins is a former deputy assistant secretary of the HHS department.
“Investors may have to forget everything they thought they knew about Republicans and health care,” he said. “Kennedy’s appointment could reduce the likelihood that traditionally qualified, experienced (Republican) staff will agree to an HHS, creating more uncertainty.”
The only stock in the S&P 500 that fell more than Moderna was Applied Materials, which fell 8.5% despite reporting higher profit than analysts expected for its latest quarter. The provider of manufacturing equipment and services for the semiconductor industry gave a forecast for future sales, the average of which was below analysts’ expectations.
Companies are under pressure to deliver substantial growth, in part because their stock prices have risen much faster than their profits. This makes the broad stock market appear more pricey in many ways, which is why critics are calling for at least a slowdown. The S&P 500 is still up 23% this year and, despite this week’s weakness, is near its all-time high hit a few days ago.
Stock markets have been on a general upswing since Election Day, when Trump’s victory sent global financial markets into turmoil. Investors immediately began pushing up shares of banks, smaller U.S. companies and cryptocurrencies as they bet on the winners of Trump’s penchant for higher tariffs, lower tax rates and looser regulation.
But investors are also considering some of the potential downsides that Trump’s return to the White House could bring.
In addition to Friday’s blow to vaccine makers, Treasury yields have also risen in the bond market, both due to the economy’s surprising resilience and concerns that Trump’s policies could lead to larger U.S. government deficits and faster inflation.
That has forced traders to recalibrate how much relief the Federal Reserve could provide the economy through rate cuts next year. The Fed cut its key interest rate for the second time this year earlier this month, and previous forecasts released by Fed officials suggested more rate cuts were likely through 2025.
Lower interest rates can boost the economy and the stock market, especially after the Fed kept interest rates at a two-year high, but they can also put upward pressure on inflation.
On Thursday, Fed Chairman Jerome Powell indicated that the US central bank would be cautious in future interest rate decisions. “The economy is not sending signals that we need to be in a hurry to cut rates,” he said, but declined to discuss how Trump’s policies might change things.
Since then, traders have cut their forecasts on whether the Fed will cut interest rates again at its meeting next month, but they still see a better chance than a coin toss, according to CME Group.
On Friday, Treasury yields in the bond market were mixed following several economic reports.
One showed that shoppers spent more than expected at U.S. retailers last month, another signal that the most influential force on the economy remains solid.
“Many consumers reported postponing travel and major item purchases until after the election,” said Brian Jacobsen, chief economist at Annex Wealth Management. “Many companies reported that they were deferring capital investments due to the election. Now that the uncertainty about the outcome is behind us, we could see some decent ‘relief spending’.”
However, Friday’s retail sales data may not be quite as sturdy as it seems. After car purchases were taken away, retail sales last month were weaker than economists expected.
Meanwhile, a separate report showed manufacturing activity in New York state is growing strongly. This significantly exceeded expectations of zero growth and is a consequence of the decline in October. Some of the survey responses were collected after Election Day.
On the bond market, the yield on 10-year government bonds remained stable at 4.44%. The two-year Treasury yield, more in line with expectations for Fed action, fell to 4.30% from 4.36% overdue Thursday.
In overseas stock markets, London’s FTSE 100 fell 0.1% after data from the Office for National Statistics showed economic growth slowed to 0.1% in the July-September quarter, compared with 0.5% in the previous quarter . It was weaker than expected.
The Nikkei 225 in Tokyo rose 0.3% after data showed growth in Japan’s economy accelerated in the final quarter despite the Bank of Japan raising interest rates in July.
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AP writers Matt Ott and Zimo Zhong contributed.
