Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024. 

Brendan Mcdermid | Reuters

Stocks fell Monday after comments from U.S. Federal Reserve Chair Jerome Powell dashed investor hopes for interest rate cuts in the near term and yields pushed higher.

The Dow Jones Industrial Average dropped 384 points, or 1%. The S&P 500 slid 0.7% along with the Nasdaq Composite.

In an interview with “60 Minutes” that aired Sunday, Powell reiterated comments made after last week’s January policy meeting. After the Fed kept interest rates unchanged, Powell suggested that a rate cut in March was unlikely.

“We want to see more evidence that inflation is moving sustainably down to 2%,” he said. “Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”

Those comments lifted Treasury yields and dampened expectations for rate cuts in the near term. The yield on the 10-year Treasury note was last up more than 12 basis points to 4.158%.

Investors also assessed a fresh batch of strong economic data as suggested rates may stay elevated for longer than anticipated. The ISM nonmanufacturing index for January came in at 53.4, higher than a Dow Jones forecast of 52.

Earnings season stretched on, with McDonald’s shares slipping 3% after posting mixed quarterly results. Caterpillar shares popped more than 2% after posting strong profits. Meanwhile, Boeing slumped 2% on news that it will have to rework 50 undelivered 737 Max airplanes.

Monday’s moves come after the three major averages rose for the 13th week out of 14, powered by a stronger-than-expected January jobs report and solid earnings reports from Microsoft and Meta Platforms.

“The fundamental narrative survived a robust stress test this week and it’s hard to poke a hole in either the earnings power of US tech or the broader growth/inflation tradeoff … the tactical setup, however, looks demanding and I’m a bit doubtful the next few months will sustain the same degree of upside torque that we witnessed in the past few months,” Tony Pasquariello, global head of hedge fund coverage at Goldman Sachs, said in a note to clients on Saturday.

Traders will also be keeping an eye on the Middle East, where the U.S. began airstrikes in Iraq and Syria on Friday.

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