Fed policy decision awaited on Wednesday
November PPI logs highest rise since 2010
Indexes down: S&P 1.10%, Nasdaq 1.78%, Dow 0.34%
The S&P 500 and the Nasdaq fell more than 1% each on Tuesday after data showed producer prices increased more than expected in November and ahead of a potential decision on faster tapering from the U.S. Federal Reserve this week.
The fast-spreading Omicron coronavirus variant also dampened investor sentiment after the S&P 500 index (.SPX) hit an all-time closing high late last week.
Declines were led by megacap technology stocks, with Meta Platforms (FB.O), Microsoft Corp (MSFT.O), Tesla Inc (TSLA.O), Alphabet Inc (GOOGL.O) and Amazon.com Inc (AMZN.O) falling between 1.3% and 4.0%.
Apple Inc (AAPL.O) fell 1.6% but stayed on track to become the world’s first $3 trillion company by market value.
Data from the Labor Department showed the producer price index (PPI) for final demand in the 12 months through November shot up 9.6%, clocking its largest gain since November 2010 and following an 8.8% increase in October.
“The story for much of 2021, or certainly the last six months has been inflationary signs that have been more and more concerning,” said David Keller, chief market strategist at StockCharts.com.
Nine of the 11 major S&P 500 sector indexes fell, with financials (.SPSY) gaining 0.5%, as investors expected a hawkish tone from the Fed at the end of its two-day meeting on Wednesday.
The U.S. central bank will likely signal a faster wind-down of asset purchases, and thus, a quicker start to interest rate hikes in order to contain the rapid rise in prices.
“I would say this meeting is when we start to get some clarity on how they’re (the Fed) going to address this idea of inflation that has remained elevated and most likely will remain an issue going into next year,” Keller said.
A Reuters poll of economists sees the central bank hiking interest rates from near zero to 0.25%-0.50% in the third quarter of next year, followed by another in the fourth quarter.
At 11:35 a.m. ET the Dow Jones Industrial Average (.DJI) was down 119.65 points, or 0.34%, at 35,531.30, the S&P 500 (.SPX) was down 51.36 points, or 1.10%, at 4,617.61, and the Nasdaq Composite (.IXIC) was down 274.27 points, or 1.78%, at 15,139.01.
Beyond Meat Inc (BYND.O) firmed 6.7% after Piper Sandler upgraded the plant-based meat maker’s stock to “neutral” from “underweight”.
Declining issues outnumbered advancers for a 1.77-to-1 ratio on the NYSE and a 2.03-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and two new lows, while the Nasdaq recorded 16 new highs and 266 new lows.