(Bloomberg) — Stocks dropped after data showed a record jump in producer prices, increasing pressure on the Federal Reserve to tighten monetary policy. Treasury yields rose.
Technology shares led losses in the S&P 500, while the Nasdaq 100 slid 2%. A hasty policy shift by central banks anxious to tame inflation is the biggest downside risk for equities in 2022, according to an informal Bloomberg News survey of fund managers. The Fed, which will wrap up its final meeting of 2021 Wednesday, is expected to accelerate its tapering of asset purchases — an action that would allow officials to begin lifting rates next year.
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Comments:
- “Anytime there’s a risk of easy money being taken away, that will result in some of these very expensive areas of the market to pull back,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.
- “The pressure on the Fed to pick up the pace of tightening is only mounting. With higher prices permeating the marketplace, we could see a snowball effect when it comes to inflation challenges as more suppliers justify higher prices and more consumers begin to close their wallets,” said Mike Loewengart, managing director of investment strategy at E*Trade Financial.
- “The inflation trajectory remains worrisome. While we believe that price pressures will abate next year, the Fed is doing the prudent thing by tapering faster, so that it is well-positioned to hike rates if needed,” said Win Thin, global head of currency strategy at Brown Brothers Harriman.
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A Goldman Sachs Group Inc. basket of the 50 most-shorted stocks has plummeted back into a bear market for the first time since June, ringing up gains for traders who sell shares they’d borrowed in hopes of buying them back at lower prices. The renewed selloff in the more speculative corners of the market adds more evidence of a waning appetite to take risks as a new variant of the coronavirus spreads and the Fed zeroes in on fighting inflation.
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Corporate highlights:
- Elon Musk made more headway toward his pledge to sell 10% of his Tesla Inc. stake, and it may have cost the carmaker its $1 trillion valuation.
- Apple Inc. analysts just keep getting more bullish, with Bank of America upgrading the iPhone maker to buy on the revenue opportunity from virtual-reality products.
- 3M Co. agreed to separate its food-safety business and join it with Neogen Corp. in a deal that would value the combined company at about $9.3 billion.
Read: Musk, Bezos Lead the Charge of U.S. Billionaires Selling Shares
Elsewhere, oil fell as the International Energy Agency said the global market has returned to surplus with the omicron variant curbing international travel.
Here are some key events this week:
- China releases November industrial output, retail sales data, Wednesday.
- Fed rate decision, Wednesday.
- U.S. business inventories, retail sales, empire manufacturing, Wednesday.
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- U.S. housing starts, initial jobless claims, industrial production, Thursday.
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
- “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.
For more market analysis, read our MLIV blog.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.3% as of 12:16 p.m. New York time
- The Nasdaq 100 fell 2%
- The Dow Jones Industrial Average fell 0.5%
- The MSCI World index fell 1.1%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.1273
- The British pound was little changed at $1.3225
- The Japanese yen was little changed at 113.64 per dollar
Bonds
- The yield on 10-year Treasuries advanced two basis points to 1.43%
- Germany’s 10-year yield advanced one basis point to -0.37%
- Britain’s 10-year yield advanced three basis points to 0.72%
Commodities
- West Texas Intermediate crude fell 2.1% to $69.76 a barrel
- Gold futures fell 0.8% to $1,774.20 an ounce
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