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The New York Stock Exchange. Stocks in the U.S. retreated Monday.
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The stock markets was falling hard again Tuesday as U.S. producer prices continued to surge, creating more market angst that major central banks will tighten monetary policy faster.
In afternoon trading, the
Dow Jones Industrial Average
was down 197 points, or 0.6%, while the
S&P 500
fell 1.3%, and the
Nasdaq Composite
dropped 2%.
If investors were expecting to see signs that inflation was finally beginning to cool, they had another thing coming. U.S. producer prices rose 0.8% in November from October, above forecasts for 0.5%, and up from 0.6%, while core PPI increased 0.7%, ahead of expectations for 0.4%. On a year-over-year basis, PPI rose 9.6%.
This potentially emboldens the Federal Reserve to move faster in removing the tens of billions of dollars a month it has been pouring into markets.
Investors have been expecting the Federal Reserve to indicate this week that it will speed up the “tapering,” or phasing out, of its bond-buying program, which might in turn signal the U.S. central bank will be raising interest rates sooner than thought. The Fed will announced its policy decision Wednesday.
“There is little doubt the Fed has all it needs to justify accelerating the tapering plans, and high valuation stocks have been selling off in anticipation of a higher interest rate environment,” wrote Louis Navellier, founder of Navellier & Associates.
Indeed, high-valuation technology stocks were getting hit the hardest. Many tech companies are innovating to create sizable profits many years down the line—and less liquidity flowing through markets makes investors less willing to make risky, long-term bets on companies.
Overseas, though, the Bank of England and the European Central Bank might send more dovish signals, ignoring for now multiyear high inflation on concerns that the Omicron coronavirus variant might slow the economic recovery.
China, meanwhile, looks to be easing monetary policy, which could also provide a boost to global risk assets. “The more worried China’s government sounds about the economy, the more excited investors get,” write Gavekal’s Thomas Gatley and Wei He.
Oil prices were lower after a report from the International Energy Agency cut its oil demand outlook for next year by 100,000 barrels a day, indicating that the surge of coronavirus cases due to the Omicron variant likely will affect global growth.
West Texas Intermediate fell 2.1% to below $70 a barrel.
Here are five stocks on the move Tuesday:
Beyond Meat
(ticker: BYND) was up 7.2% after getting upgraded to Neutral from Underweight at Piper Sandler.
Apple
(AAPL) was down 1.4% despite getting upgraded to Buy from Neutral at Bank of America.
Tesla
(TSLA) was down 3.4% Tuesday, after founder and CEO Elon Musk sold more than $900 million worth of shares, while exercising his right to acquire stock options on more than 2 million shares in his electric-vehicle company.
Cloudflare
(NET) slumped 12% and
Datadog
(DDOG) dropped 9.3% after getting cut to Underweight from Neutral at JPMorgan.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com and Pierre Briançon at pierre.briancon@dowjones.com
