By Caroline Valetkevitch
NEW YORK (Reuters) -Major stock indexes mostly eased on Monday after gaining on Friday when 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 Jackson Hole. 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.
The dollar index, which measures the greenback against a basket of currencies, rose 0.58% to 98.41, with the euro down 0.79% at $1.1622. Against the Japanese yen, the dollar strengthened 0.57% to 147.78.
The Dow Jones Industrial Average fell 284.09 points, or 0.62%, to 45,346.99, the S&P 500 fell 11.38 points, or 0.18%, to 6,455.26 and the Nasdaq Composite rose 20.31 points, or 0.09%, to 21,515.66.
Investors are also keen to hear from Nvidia, whose results are due on Wednesday.
MSCI’s gauge of stocks across the globe fell 1.70 points, or 0.18%, to 953.59. The pan-European STOXX 600 index fell 0.44%.
London markets were closed for a holiday, thinning overall trading volumes in Europe.
The European Central Bank is expected to hold rates unchanged in September, sources told Reuters at the weekend. Discussions about further cuts may resume in the autumn if the economy weakens.
U.S. President Donald Trump criticized South Korea just hours before a summit on Monday with its new president, Lee Jae Myung. The two countries are engaged in lower-level negotiations over trade, nuclear power and military spending.
The Korean won weakened 0.43% against the dollar.
Meanwhile, U.S. Treasury yields also rose as traders prepared for auctions this week.
The yield on benchmark U.S. 10-year notes rose 1.3 basis points to 4.271%.
Earlier, euro zone bond yields also rose, reversing their fall from late Friday.
Oil prices climbed as Russia and Ukraine peace talks dragged on. U.S. crude futures rose $1.14 to settle at $64.80 a barrel, while Brent futures gained $1.07 to $68.80.
Spot gold fell 0.02% to $3,371.39 an ounce.
(Reporting by Caroline Valetkevitch in New York; Additional reporting by Nell Mackenzie in London; Editing by Andrew Heavens and Lisa Shumaker)
