Finance News

Shares fall forward of key Fed determination Nasdaq falls 1% as software program names slide

US stocks fell on Tuesday as some big technology stocks fell and new inflation data continued to show prices rise sharply.

The S&P 500 was down 0.7% while the Nasdaq Composite was down more than 1%. The Dow Jones Industrial Average lost 105 points but outperformed the other major benchmarks.

Tech stocks were a major weakness on Tuesday as the sector trimmed losses in afternoon trading. Microsoft was a huge drag on market averages, falling more than 3%. The software share Adobe lost 6.6%.

Elsewhere, automaker Ford lost 1.9% after it was revealed that Toyota will invest $ 35 billion in battery-powered electronic vehicles by 2030, an area in which Ford has sought to establish itself as a leader. Tesla shares fell 0.8% after CEO Elon Musk announced that he had sold an additional $ 906.5 million in shares.

"The large-cap names are falling by the wayside, and that's exactly what happened in 2018 when we last had some kind of rolling correction idea," said Mike Wilson, chief investment officer of Morgan Stanley, in the Halftime Report.

The downward day on Wall Street followed the November producer price index, which was up 9.6% year-over-year, the fastest pace on record and above the 9.2% expected by economists, according to the Dow Jones. The index rose by 0.8% month-on-month and was thus above the expected 0.5%.

Inflation data is hotter than expected as the Federal Reserve begins its two-day meeting on Tuesday. The central bank will issue a statement on Wednesday with quarterly forecasts for the economy, inflation and interest rates. Chairman Jerome Powell will also hold a press conference.

Investors will be watching closely this week to see if the Fed plans to accelerate the end of its bond purchase program. Currently, the central bank's asset purchase program ends in June 2022, but several officials have spoken of stopping the purchases earlier.

The latest CNBC-Fed poll showed that investment experts and economists expect the Fed to scale back its bond purchases by March and start rate hikes in June.

Wolfe Research strategist Chris Senyek said in a statement to clients on Tuesday that the Fed must walk a fine line in order not to scare the markets.

"Fed Chairman Powell has a very difficult communications task ahead of him tomorrow afternoon. We are in line with the consensus and expect the Fed to end its tapering program in March / April and start rate hikes in May, ”the press release said. “If Fed Chairman Powell emphasizes that the FOMC remains flexible, the 'Fed put' should remain in place. However, if its tone is too restrictive it could turn into a disaster like December 2018. "

On the positive side of the market, big bank stocks rose along with interest rates, with Goldman Sachs and Bank of America adding more than 1% each. Regional banks and energy stocks also outperformed.

On the Covid front, Pfizer announced that its drug for treating patients with the virus had been shown to be effective in a final analysis, including against the new Omicron variant. However, the World Health Organized warned Tuesday that the new variant appears to be spreading faster than previous versions of the virus.

Tuesday's moves marked a second day of decline for Wall Street. However, the Dow and S&P 500 are still within about 3% of their intraday record highs. The Nasdaq is about 6% below its high.

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