Stocks Slip After Powell Flags High Valuations

U.S. equities eased on Wednesday as investors locked in profits near record highs, after Federal Reserve Chair Jerome Powell cautioned that stock valuations may be running hot. Markets are also bracing for a key inflation report due later this week.

Traders are watching closely to see how the Fed approaches future rate cuts, with the economy showing signs of a cooling job market and persistent inflation risks. Earlier this week, the S&P 500, Dow, Nasdaq, and Russell 2000 all closed at all-time highs together for the first time in years. But Powell’s reminder that asset prices look “fairly highly valued” highlighted the balancing act the Fed faces in guiding policy.

The remarks drew comparisons to Alan Greenspan’s famous warning of “irrational exuberance” in the 1990s.

September’s rate cut had given stocks a boost in what’s usually a weak month, though some analysts now see investors using Powell’s comments as a reason to trim positions.

The Dow fell 164.77 points (0.36%) to 46,128.01, the S&P 500 dropped 27.91 points (0.42%) to 6,629.32, and the Nasdaq slid 112.89 points (0.50%) to 22,460.90.

Valuation metrics are now at their highest levels since 2021, edging toward peaks not seen since the dot-com bubble.

Sector Moves

• Materials led the decline as Freeport-McMoRan tumbled over 15% after halting operations at its Grasberg mine in Indonesia and cutting its copper and gold sales outlook.

• Energy stocks outperformed, with the sector index up 1.6%, lifted by crude oil hitting a seven-week high after U.S. inventories fell unexpectedly.

Company Highlights

• Lithium Americas nearly doubled after reports the Trump administration is considering taking up to a 10% stake in the firm. The company is also in talks with GM for a $2.26 billion government loan tied to its Thacker Pass lithium project. GM rose 1.6% after UBS upgraded it to buy.

• Micron fell 3% following earnings.

• Oracle slipped 3% on news it may raise $15 billion through a bond sale.

Looking Ahead

Markets now await the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) index, due later this week.

On the NYSE, decliners outpaced advancers nearly 2-to-1, while the Nasdaq saw a 1.45-to-1 ratio of losers to gainers.