Stocks Tumble As Investors Reconsider Fed Moves
5:03 pm Thursday, December 16th, 2021
The Nasdaq tumbled on Thursday in a mixed day on Wall Street as the Federal Reserve’s announcement of a faster end to its pandemic-era stimulus pushed investors toward more economically sensitive sectors and away from technology stocks.
The underperformance of the growth stocks is best represented by the steep losses in the Nasdaq Composite (-2.0%) and S&P 500 information technology sector (-2.5%), which are down 2.0% and 2.5%, respectively.
Adobe (ADBE) is setting the negative tone in the growth-stock space after the company issued downside guidance for fiscal Q1 and FY22. ADBE’s 11% decline is serving as a reminder of what could happen if highly-valued stocks don’t live up to expectations.
Highlighting the winners, the energy (+2.0%), financials (+1.5%), and materials (+1.3%) sectors are each up more than 1.0%, and the utilities (+0.9%) and consumer staples (+0.8%) sectors follow suit with decent gains.
Accenture (ACN) was rallying 7% on pleasing earnings news while AT&T (T) is rallying 8% after Morgan Stanley upgraded the stock to Overweight from Equal-Weight for valuation reasons.
Notably, most Treasury yields are trading lower in a counter-intuitive trade considering the outperformance of the cyclical/value stocks and higher oil prices ($75.35, +1.48, +2.1%).
The 10-yr yield was trading at 1.47% earlier today, but now it’s trading at 1.42%, or four basis points below yesterday’s settlement. The 2-yr yield is down six basis points to 0.61%, feeding into the view that the Omicron variant could persuade the Fed to not hike rates three times next year. Fed Chair Powell said yesterday that the variant’s economic impact is still uncertain.
Housing starts in November increased 11.8% month-over-month to a seasonally adjusted annual rate of 1.679 million units (consensus 1.570 million) while building permits rose 3.6% to 1.712 million (consensus 1.670 million).
Initial jobless claims for the week ending December 11 were a bit higher than expected, increasing by 18,000 to 206,000 (consensus 195,000), but still holding at a relatively low and encouraging level. Continuing claims for the week ending December 4 decreased by 154,000 to 1.845 million, which is the lowest since March 14, 2020.
