Stocks, led by tech stocks, fall amid central bank decisions

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Major U.S. stock indices fell after major central banks around the world took steps to tighten monetary policies, reversing some of their big gains from the previous session.

The S&P 500 fell about 0.9% at 4 p.m., with losses accelerating in the late afternoon. The Nasdaq Composite lost around 2.5% as tech stocks lagged the broader market. The Dow Jones Industrial Average lost around 30 points, or 0.1%.

US stocks surged on Wednesday after the Fed’s move, with the S&P 500 reversing earlier losses to mark a big one-day lead that puts it just below its previous closing high. Some investors said the markets reacted positively to the Federal Reserve’s move because it reduced the risk of skyrocketing consumer price growth. Although the central bank has paved the way for three interest rate hikes next year, analysts said the Fed was not as aggressive in raising rates as initially feared.

Still, concerns about the Fed’s trajectory and the spread of the Covid-19 Omicron variant have sparked volatility in recent times and have made some investors more cautious.

Since Thanksgiving, major indices have been disrupted by volatility due to the new variant of Covid-19 and changes in Fed policy.

The tech sector has been particularly turbulent as investors shifted their outlook on growing companies and shied away from some of the more crowded bets. The tech-rich Nasdaq is in its fourth consecutive session of above 1% moves in either direction. And although the S&P 500 hovered near its recent high, there have been big moves among stocks and individual sectors.

“There’s a lot going on below the surface,” said Adam Phillips, managing director of portfolio strategy at EP Wealth Advisors. “The underlying narrative and sentiment has changed.”

A survey released Thursday by the American Association of Individual Investors showed that bullish sentiment among investors recently fell to its lowest level in three months.

Apple lost 4.1% on Thursday, while Amazon shares slipped 2.1%. Tesla lost 4.2%. Meanwhile, stocks of banks and energy companies outperformed.

Some analysts have said the prospect of higher interest rates has made growth stocks less attractive.

Adobe lost 10% after forecast below Wall Street forecast, making it one of the biggest losers in the S&P 500. It is one of many software companies that has seen a huge post-profit movement. . Oracle shares recently jumped about 15.6% after this month’s earnings, making it the company’s biggest post-earnings jump in more than 10 years, according to brokerage firm Macro. Risk Advisors. Intuit and Salesforce.com also had some of their biggest post-profit moves of the past decade.

Still, some investors have said Thursday’s measures will prove to be a failure.

“There is a golden loop interpretation” of the Fed, said Edward Park, director of investments at Brooks Macdonald, referring to a situation where the Fed is controlling inflation but not pushing rates high enough to kill the economic recovery.

Mr Park said stocks are expected to continue rising until the end of the year. “You have people who say, you know, it’s painful to be on fixed income or in cash.”

In business news, Lennar fell 3.2% after the homebuilder reported earnings and sales that missed analysts’ estimates. Accenture jumped about 7% after raising its earnings forecast.

Overseas markets have increased. The pancontinental Stoxx Europe 600 gained 1.2%, while the UK blue chip FTSE 100 rose around 1.3% after the Bank of England raised its benchmark rate. The increase was the first by a major central bank since the start of the pandemic.

The Federal Reserve has said it will accelerate the gradual reduction in its bond buying program, the biggest move the central bank has taken to reverse its pandemic-era stimulus measures. Here’s how tapering works and why it puts the markets on high alert. Photographic illustration: Adèle Morgan / WSJ

The European Central Bank has kept its policy rate in place and has said it will not increase borrowing costs until inflation is sustainably above target. Moving away from the Fed, the ECB said it would phase out an emergency bond buying program while bolstering other stimulus measures.

The Bank of England has said it is necessary to raise rates to bring inflation back to its 2% target. The Fed completed its own pivot on Wednesday, approving plans to end an asset purchase program by March and providing for three rate hikes in 2022.

Wall Street indices gained on Wednesday after the Federal Reserve’s policy decision.


Photo:

ANDREW KELLY / REUTERS

Signs of an increasingly tight labor market are one reason the US and UK have changed course to lift monetary stimulus. Data released Thursday added to that picture, showing that new claims for unemployment benefits in the United States edged up last week but remained at very low levels.

Some investors have become more concerned about Covid-19 infection rates, which are on the rise in Germany and other parts of Europe. This has caused a new wave of government restrictions and consumer reluctance.

And many traders are watching for a big options expiration tomorrow, when more than 109 million contracts expire, up about 19% from the same time last year, according to Chris Murphy, co-head of strategy. derivative products at Susquehanna. More than 70 million stock options are due to expire tomorrow, the highest for a December expiration in the past decade.

Many traders have turned to bullish options this year to bet on a market rise, thus increasing the number of open contracts. Sometimes these option expiration dates have fueled volatility in the markets.

Futures on Brent, the benchmark in international oil markets, rose about 1.5% to $ 75.02 a barrel. Yields on 10-year Treasuries fell to 1.422% Thursday from 1.460% Wednesday.

Turkey’s currency crisis worsened after the central bank bowed to political pressure to cut interest rates, despite soaring inflation.

In Asia, Japan’s Nikkei 225 gained 2.1%, the Shanghai Composite Index rose about 0.8%, and the Hong Kong Hang Seng added 0.2%.

Write to Joe Wallace at [email protected] and Gunjan Banerji at [email protected]

Corrections and amplifications
Yields on 10-year Treasuries fell to 1.419% on Thursday morning. An earlier version of this article incorrectly stated that they reached this level as of Wednesday. (Corrected December 16)

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