Stocks Fall After A Jump In Wholesale Prices
5:03 pm Tuesday, December 14th, 2021
Stocks fell as traders took in the latest sign that inflation in the world’s largest economy is still running high ahead of the Federal Reserve’s last interest rate decision of the year.
Inflation concerns have been fueled by a hotter-than-expected Producer Price Index for November, which was up 0.8% month-over-month (Briefing.com consensus 0.5%) and up 9.6% year-over-year.
The report has bolstered expectations for the Fed to taper faster than planned and potentially be more aggressive with rate hikes, which some fear could stymie growth when the global economy is still struggling to fend off the coronavirus. The FOMC will conclude its two-day policy meeting tomorrow.
Presently, the mega-caps are leading the decline amid profit-taking interest, leaving the Vanguard Mega Cap Growth ETF (MGK) down 2.4%. For comparison, the Invesco S&P 500 Equal Weight ETF (RSP) is down 0.8%.
The S&P 500 information technology (-2.7%), consumer discretionary (-1.7%), and communication services (-1.1%) sectors, which contain the mega-caps, are among the weakest performers right now. The financials (+0.4%) and energy (+0.2%) sectors are the only sectors bucking the negative trend with modest gains.
Apple (AAPL) is down 1.5% despite BofA Securities upgrading the stock to Buy from Neutral. Adobe (ADBE) is down 8%, further pressured by an analyst downgrade to Neutral from Overweight at JP Morgan.
Pfizer (PFE), on the other hand, is trading at a record high after confirming the robust efficacy of its COVID-19 oral antiviral treatment. The company said its pill reduces the risk of hospitalization or death by 89% within three days of symptom onset compared to placebo.
Elsewhere, the 10-yr yield is up just two basis point to 1.44% despite the hot inflation data. The tame reaction might be because of growth concerns and/or a view that year-over-year inflation rates could level off next year with a more aggressive Fed. The U.S. Dollar Index is up 0.1% to 96.45.
The November Producer Price Index showed that the index for final demand increased 0.8% month-over-month (consensus 0.5%) while the index for final demand, less foods and energy, increased 0.7% (consensus 0.4%). That left the year-over-year increases on an unadjusted basis at 9.6% and 7.7%, respectively.
