By Caroline Valetkevitch
NEW YORK (Reuters) -Major stock indexes eased on Monday after gaining on Friday when U.S. Federal Reserve Chair Jerome Powell indicated that a September interest rate cut was likely but not certain, while the dollar gained.
The dollar fell last week following Powell’s remarks at the Fed’s annual symposium in Jackson Hole, Wyoming. U.S. Treasury yields were higher on Monday.
Major brokerages, including Barclays, BNP Paribas and Deutsche Bank, now expect a 25-basis-point Fed rate cut in September. Fed funds futures traders are pricing in 84% odds of a September cut, according to the CME Group’s FedWatch Tool.
“On Friday there was a lot of enthusiasm about Powell basically indicating that there would likely be a rate cut. The market may have overreacted to his comments,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York, said.
“I do believe we will get a rate cut, but I don’t think it will be more than 25 basis points, and a lot depends on this Friday’s PCE price inflation index.”
Data for August due before the Fed’s September 16-17 meeting could still sway Fed policy. The U.S. personal consumption prices reading, due on Friday, is considered the Fed’s preferred inflation gauge.
Hotter-than-expected U.S. producer price data last month raised some questions over the certainty of a cut.
Investors are also keen to hear from AI chipmaker Nvidia, whose results are expected on Wednesday.
The Dow Jones Industrial Average fell 349.27 points, or 0.77%, to 45,282.47, the S&P 500 fell 27.59 points, or 0.43%, to 6,439.32 and the Nasdaq Composite fell 47.24 points, or 0.22%, to 21,449.29.
Nvidia is among the last of the S&P 500 companies to report on the most recent quarter. Overall results so far have been much better than expected and have helped to support stocks.
Year-over-year estimated earnings growth for the S&P 500 was at 12.9% as of Friday, sharply higher than 5.8% on July 1, according to LSEG.
MSCI’s gauge of stocks across the globe fell 2.33 points, or 0.24%, to 952.96. The pan-European STOXX 600 index fell 0.44%.
In deal news, U.S. soft drinks giant Keurig Dr Pepper is set to create a global coffee giant to rival market leader Nestle with an $18 billion takeover of JDE Peet’s, Europe’s largest acquisition in more than two years.
London markets were closed for a holiday, thinning overall trading volumes in Europe.
On the trade front, U.S. President Donald Trump said on Monday he wanted to meet with North Korean leader Kim Jong Un this year and that he was open to further trade talks with South Korea even as he criticized the visiting Asian ally.
The Korean won weakened 0.5% against the dollar.
The dollar index, which measures the greenback against a basket of currencies, rose 0.56% to 98.39, with the euro down 0.79% at $1.1623. Against the Japanese yen, the dollar strengthened 0.5% to 147.67.
U.S. Treasury yields also rose as traders prepared for auctions this week. The Treasury will sell short- and intermediate-dated debt this week.
The yield on benchmark U.S. 10-year notes rose 1.9 basis points to 4.277%.
Earlier, euro zone bond yields also rose, reversing their fall from late Friday.
Oil prices extended last week’s gains as traders anticipated more U.S. sanctions on Russian oil and Ukrainian attacks on Russian energy infrastructure that could disrupt supplies.
U.S. crude futures gained $1.14 to settle at $64.80 a barrel, while Brent futures gained $1.07 to $68.80.
Spot gold fell 0.21% to $3,364.47 an ounce.
(Reporting by Caroline Valetkevitch in New York; Additional reporting by Nell Mackenzie in London; Editing by Andrew Heavens, Lisa Shumaker and Nia Williams)
