Variant Worries, Hot Inflation Report Stymie Stocks…..

U.S. equities finished in the red, adding to yesterday’s losses, with concerns over the omicron variant and its impact continuing, and as producer prices came in hotter than expected and rose from last month. In positive COVID-19 news, Pfizer reported results on its oral antiviral pill that showed 90% efficacy at preventing hospitalizations and deaths in high-risk patients, while some early reports show positive signs regarding vaccine effectiveness against omicron. In other economic news, small business optimism ticked slightly higher, and the Fed kicked off its two-day monetary policy meeting today where investors are expecting it to speed up the pace of its bond tapering. Treasuries were lower, with yields slightly higher at the long end, and the U.S. dollar gained ground, while crude oil prices came under pressure, and gold tumbled. Europe finished mixed and markets in Asia were lower, as the markets await key monetary policy decisions from across the globe.

The Dow Jones Industrial Average decreased 107 points (0.3%) to 35,544, the S&P 500 Index shed 35 points (0.8%) to 4,634, and the Nasdaq Composite declined 176 points (1.1%) to 15,238. In moderately-heavy volume, 4.3 billion shares of NYSE-listed stocks were traded, and 4.7 billion shares changed hands on the Nasdaq. WTI crude oil lost $0.56 to $70.73 per barrel. Elsewhere, the gold spot price fell $17.30 to $1,771.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—advanced 0.3% to 96.57.

The Producer Price Index (PPI) showed prices at the wholesale level in October rose 0.8% month-over-month (m/m), north of the Bloomberg consensus estimate of 0.5%, and above October’s 0.6% increase. The core rate, which excludes food and energy, gained 0.7% m/m, above estimates of a 0.4% rise and above the prior month’s 0.4% gain. Y/Y, the headline rate was 9.6% higher, north of projections calling for a 9.2% increase and compared to October’s 8.6% gain. The core PPI increased 7.7% y/y last month, also exceeding estimates of 7.2%, and following October’s 6.8% increase.

The National Federation of Independent Business (NFIB) Small Business Optimism Index for November ticked slightly higher to 98.4 from October’s 98.2 level, right in line with the Bloomberg estimate. The report pointed out labor shortages and inventory shortages continue to impact business operations. The NFIB said, “As the end of the year nears, the outlook for business conditions is not encouraging to small business owners as lawmakers propose additional mandates and tax increases.”

Treasuries were mostly lower, as the yield on the 2-year note was flat at 0.64%, while the yields on the 10-year note and 30-year bond gained 1 basis point (bp) to 1.44%, and 1.82%,

©2021 Charles Schwab & Co., Inc. All rights reserved. Member SIPC.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.