Stocks Tumble in Final Minutes as Tech Rally Breaks Down…..
After a two-day bounce from a lackluster start to 2022, U.S. equities finished lower, as the recent rebound for Information Technology issues broke down. Investors sifted through some mixed economic data that showed that while producer prices moderated more than expected compared to last month, they remained severely elevated versus last year. As well, jobless claims unexpectedly rose for a second-straight week, likely due to the impact of the festering spread of the omicron variant, but continuing claims remained in a downtrend. Q4 earnings season kicked off, with Delta Air Lines and KB Home rising following their results, while Ford said it plans to increase its electric vehicle production. Treasuries were higher, seeing downward pressure in yields, and the U.S. dollar was slightly lower to extend a recent decline, while gold and crude oil prices traded to the downside. Markets in Europe and Asia finished mixed following yesterday’s broad-based gains.
The Dow Jones Industrial Average fell 177 points (0.5%) to 36,114, the S&P 500 Index lost 67 points (1.4%) to 4,659, and the Nasdaq Composite was 382 points (2.5%) lower at 14,807. In heavy volume, 4.2 billion shares of NYSE-listed stocks were traded, and 4.2 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.52 to $82.12 per barrel. Elsewhere, the gold spot price declined $6.20 to $1,821.10 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—lost 0.1% to 94.87.
The Producer Price Index (PPI) showed prices at the wholesale level in December rose 0.2% month-over-month (m/m), below the Bloomberg consensus estimate of a 0.4% gain, and south of November’s upwardly-revised 1.0% increase. The core rate, which excludes food and energy, gained 0.5% m/m, in line with estimates but below the prior month’s upward adjustment to a 0.9% rise. Y/Y, the headline rate was 9.7% higher, south of projections calling it to match November’s upwardly-revised 9.8% gain. The core PPI increased 8.3% y/y last month, above estimates of 8.0% and November’s 7.7% increase.
Weekly initial jobless claims came in at a level of 230,000 for the week ended January 8, versus estimates of 200,000, and versus the prior week’s unrevised 207,000 level. The four-week moving average increased by 6,250 to 210,750, and continuing claims for the week ended January 1 dropped by 194,000 to 1,559,000, below of estimates of 1,733,000. The four-week moving average of continuing claims fell by 77,000 to 1,721,500.
Treasuries finished higher, as the yield on the 2-year note lost 1 basis point (bp) to 0.89%, while the yields on the 10-year note and the 30-year bond fell 3 bps to 1.70% and 2.04%, respectively. The bond markets have been volatile as the markets grapple with the prospect of Fed tightening and the rapid spread of the omicron variant, while last week’s hawkish minutes from the Fed’s December meeting, suggested along with accelerated tapering and multiple rate hikes this year, it may begin to reduce its balance sheet sooner than expected.
©2022 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.