(Bloomberg) — Stocks retreated after data showed the biggest-ever jump in producer prices, increasing pressure on the Federal Reserve to tighten monetary policy.
The S&P 500 fell for a second day, but pared some of its Tuesday’s losses as gains in banks and industrial companies tempered a slide in technology firms. The November inflation report came after Friday’s reading on consumer prices, which rose at the fastest pace in nearly 40 years. Treasury yields climbed. The dollar fluctuated.
The spike in inflation has put pressure on policy makers to act. The Fed, which will wrap up its final meeting of 2021 on Wednesday, is anticipated to accelerate tapering of its bond-buying program — an action that would allow officials to begin increasing interest rates next year. The European Central Bank, Bank of England and the Bank of Japan are also due to announce their policy decisions this week.
Comments:
- “This morning’s PPI report suggests that the consensus view continues to underestimate the power of the inflationary impulse that is coursing through the U.S. economy,” wrote Michael Shaoul, chief executive officer at Marketfield Asset Management.
- “There is risk now that inflation has become entrenched in households’ psyches, which further pressures policy makers at the Fed to be more aggressive in their tightening stance,” wrote Danielle DiMartino Booth, chief strategist of Quill Intelligence.
- “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,” Win Thin, global head of currency strategy at Brown Brothers Harriman.
Global fund managers piled into cash in December amid coronavirus challenges and ahead of central bank meetings — setting off Bank of America Corp.’s equity-buying signal. Market participants slashed their equity positions to the lowest since October 2020, although investments in stocks remained above the historical average.
Leading scientists cautioned that the level of immunity against Covid-19 among South Africa’s population due to earlier infections may be masking the severity of illness caused by the omicron variant. New study data showed Pfizer Inc.’s experimental pill was highly effective at keeping patients out of the hospital, but less adept at erasing milder symptoms often associated with breakthrough infections.
Read: Pfizer, J&J Vaccines Limit Severe Omicron Cases in S. Africa
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.
- Shares of U.S.-listed Chinese firms declined as a selloff in the stocks and bonds of Chinese property firm Shimao Group Holdings Ltd. hit sentiment.
- Apple Inc. analysts just keep getting more bullish, with Bank of America on Tuesday 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.
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 0.4% as of 9:53 a.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 fell 0.3%
- The MSCI World index fell 0.4%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro rose 0.1% to $1.1300
- The British pound rose 0.2% to $1.3238
- The Japanese yen fell 0.1% to 113.67 per dollar
Bonds
- The yield on 10-year Treasuries advanced four basis points to 1.45%
- Germany’s 10-year yield advanced two basis points to -0.36%
- Britain’s 10-year yield advanced two basis points to 0.72%
Commodities
- West Texas Intermediate crude fell 1% to $70.55 a barrel
- Gold futures fell 0.9% to $1,772.60 an ounce
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