Fed's Waller: If the economy slows, 2-3 rate hikes may not be necessary, if the economy accelerates as projected, 2-3 rate hikes next year would be appropriate.
Fed's Daly: We expect to finish bond purchases by March, and be ready to respond to anything the economy throws at us.
Fed's Waller: A rate hike will be warranted soon after bond purchases finish.
ECB's Wunsch: The ECB has essentially met its inflation target.
Fed's Williams: Inflation may play a role in whether the Fed raises interest rates more quickly over time.
The S&P 500 ended the week in the red Friday, as selling intensified into the close amid a rout in financials and energy.
The S&P 500 fell 1%, the Dow Jones Industrial Average fell 1.5%, or 532 points, the NASDAQ fell 0.07%.
Financials, mostly banking stocks, fell 2%, as the 10-year yield dipped further below 1.4% on concerns about the impact of the Omicron variant.
Wells Fargo (NYSE:WFC), People’s United Financial (NASDAQ:PBCT), and Goldman Sachs (NYSE:GS) were among the biggest decliners, with the latter ending the day down 4%.
Energy wasn’t far behind, down about 1% as investors continued to assess the threat of Omicron on energy demand.
Industrials also added to the selloff in cyclical sectors even as FedEx (NYSE:FDX) surged after reporting quarterly results that beat on both the top and bottom lines.
FedEx reported better-than-expected earnings per share of $4.83, as higher shipping rates helped offset increased costs during the fiscal second quarter.
“FDX reported fiscal 2Q results that were better than feared, and the company raised its full year guidance,” Deutsche Bank said as it lifted it price target on the FedEx to $310 from $299.
Despite the selling in cyclicals, which trade in tandem with the economy, some continued to back this economically sensitive sector to deliver gains.
“Given our outlook on the economy that eventually once we get past the omicron impact, this economy is still post recessionary growth,” Peter Duffy, chief investment officer of credit at Penn Capital Management said in an interview with Investing.com on Friday.
“We would tend to favor economic cyclicality are kind of the value names as opposed to the growth themes,” Duffy added.
Big tech, meanwhile, continued to bleed, paced by declines in Apple (NASDAQ:AAPL), Google (NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT), as investors reassess their appetite for growth sectors of the market amid expectations for the rates to rise.
Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) proved an exception to the selloff.
Health care was one of the few sectors in the green as a rally in health-care information company Cerner offset weakness in Johnson & Johnson (NYSE:JNJ) and Eli Lilly & Company.
Cerner (NASDAQ:CERN) rose by more than 12% following a Wall Street Journal reported suggesting the company was in talks about a potential sale to Oracle (NYSE:ORCL).
Johnson & Johnson fell 2.8% after an advisory panel for the Centers for Disease Control and Prevention voted to recommend vaccines from Pfizer and Moderna over the Johnson & Johnson vaccine.
The CDC flagged new data showing an increased risk of blood clots from the JNJ vaccine.
Eli Lilly (NYSE:LLY) fell 4% amid concerns about its Alzheimer’s disease securing approval after The European Union's drug regulator on Friday rejected Biogen (NASDAQ:BIIB) Alzheimer's drug, Aduhelm.
In other news, General Motors (NYSE:GM) fell more than 5% after Dan Ammann, CEO of its autonomous vehicle business Cruise, reportedly left the company.
The US urges the EU to ready Russia sanctions hitting energy and banks.
Biden signs debt ceiling increase bill into law.
ECB's President Lagarde: It is very unlikely the ECB will raise rates in 2022.
The ECB believes that progress toward its medium-term inflation target and economic recovery allows it to gradually reduce the pace of its asset purchases in the coming quarters. (Euro strengthened)
BoE rate rises are expected to be about 15 basis points in February, and up to 88 basis points in full-year 2022, according to money markets.
BoE Bank Rate Actual 0.25% (Forecast 0.1%, Previous 0.10%) Sterling strengthened, FTSE 100 weakened
The S&P 500 slipped Thursday, as a rout in big tech more than offset a rise in cyclicals a day after the Federal Reserve laid out a plan to speed up bond purchase tapering and begin hiking rates next year.
The S&P 500 fell 0.9%, the Dow Jones Industrial Average gained fell 0.1%, or 29.7 points, the Nasdaq fell 2.5%.
Apple (NASDAQ:AAPL) fell more than 3% leading the rout in big tech as Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB), also ending the day in the red.
Adobe Systems (NASDAQ:ADBE) was also a big loser on the day, shedding more than 10% after software maker’s fiscal 2022 fell short of Wall Street estimates.
The selloff in growth sectors like tech come a day after the Federal Reserve said it would double the pace of its monthly bond tapering to $30 billion per month, and forecast up to three hikes for next year and 2023.
“That decision [of when to hike rates] will be taken ‘in coming meetings’, which puts June in play, one quarter earlier than our call for 3Q22 liftoff,” Morgan Stanley said in a note.
Financials, meanwhile, racked up gains as investors bet that the U.S. Treasury yields are set for a boost following the slightly more hawkish than expected path of rate hikes laid out by the U.S. central bank on Wednesday.
Wells Fargo (NYSE:WFC), Bank of New York Mellon (NYSE:BK), Charles Schwab (NYSE:SCHW) were among the biggest gainers as banks' net interest margin will benefit from a rising yield environment.
Other value sectors of the market, which tend to move tandem with economy, like materials and energy also advanced.
Energy was up nearly 1%, riding the climb higher in the oil prices as investors continued to assess the demand the outlook for energy following a bullish update from the Energy Information Agency.
“[The] US Department of Energy reported a considerable decline in crude oil and oil product stocks, with crude oil seeing its most pronounced inventory reduction since September,” Commerzbank said.
In health care, Johnson & Johnson (NYSE:JNJ) ended the day more than 1% higher despite an advisory panel for the Centers for Disease Control and Prevention voted unanimously to recommend vaccines from Pfizer (NYSE:PFE) and Moderna (NASDAQ:MRNA) over the Johnson & Johnson vaccine.
In other news, Delta Air Lines (NYSE:DAL) forecast fourth quarter profit of $200 million underpinned by strong holiday demand and rising fares in the fourth quarter.
Fed funds futures are now pricing in a 90% possibility of a rate hike in April and a 50% chance in March.
US Interest Rate Decision Actual 0.25% (Forecast 0.25%, Previous 0.25%) DXY weakened, S&P 500 whipsawed, Gold weakened.
Fed policymakers see three quarter-point rate hikes in 2022, three more rate hikes in 2023.
Fed instructs NY Fed markets desk to adjust open market purchases of Treasuries to $40 bln/month, $20 bln/month of MBS starting in mid-January.
BoC's Gov. Macklem: Removing forward guidance is coming closer.
BoC's Gov. Macklem: As a result of the exceptional forward guidance, inflation is likely to rise slightly above target after we exit ELB.
EIA: US crude stockpiles in SPR fell in the most recent week to their lowest level since December 2002.
US Retail Sales MoM Actual 0.3% (Forecast 0.8%, Previous 1.7%) DXY weakened, S&P 500 whipsawed, Gold whipsawed.
Canadian CPI MoM Actual 0.2% (Forecast 0.2%, Previous 0.7%) CAD weakened.
The S&P 500 cut losses to close sharply higher Wednesday, underpinned by a rebound in tech stocks after the Federal Reserve said it would accelerate its taper and projected the first liftoff in rates next year.
The S&P 500 was up 1.63% to 4,709.85, the Dow Jones Industrial Average rose 1.1%, or 383 points, and the Nasdaq Composite added 2.1%.
The committee said it would increase the taper of its bond purchases by $30 billion a month in January, double the $15 billion monthly pace announced in November.
The timeline on rate hikes was brought forward, with up to three rate hikes projected next year, followed by another three in 2023, taking the Fed's benchmark rate to 1.6%.
"We see our forecast of three interest rate hikes [in 2022], the first probably in the spring (second quarter), confirmed," Commerzbank said in a note.
Risk sentiment improved following the announcement as a faster taper and earlier path to monetary policy tightening was largely priced in ahead of the Fed meeting.
Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:FB), and Apple (NASDAQ:AAPL), which combined make up more than fifth of the broader S&P 500, cut their losses and sparked a broader market rebound.
Consumer discretionary also played a big role in the rebound as Tesla (NASDAQ:TSLA) pared losses as investors appeared to renew their appetite on growth stocks.
Health stocks were pushed higher by an 8% jump in Eli Lilly (NYSE:LLY) after the pharmaceutical giant upgraded its earnings outlook for 2021, and guided further strength for 2022.
Energy remained under pressure even as oil prices cut their losses as fears persisted about supply outpacing demand in the wake of growing concerns about the Omicron threat on travel, and ultimately energy demand.
Devon Energy (NYSE:DVN), Occidental Petroleum (NYSE:OXY), Diamondback Energy (NASDAQ:FANG) fell more than 2%.
Inflation is expected to fall below the ECB's target of 2% in 2023 and 2024, according to projections.
UK's Health Secretary Javid: We are removing all countries from the UK COVID red list from Wednesday.
US PPI MoM Actual 0.8% (Forecast 0.5%, Previous 0.6%) - S&P 500 Weakened.
IMF: The BoE needs to withdraw exceptional monetary policy support and focus on the 12-to-24-month outlook rather than near-term covid trends.
The S&P 500 stumbled Tuesday, following a rout in big tech as further signs of inflationary pressures stoked investor worries about a hawkish Federal Reserve ahead the central bank's meeting set for later today.
The S&P 500 fell 1.3%, the Dow Jones Industrial Average slipped 0.50% , or 177 points, the NASDAQ Composite lost 2%.
Tech fell sharply as investors pulled their bets on high-valued growth concerns of the market, which are less attractive in periods of rising rates and inflation during which a dollar today is more worth more than a dollar in the future.
Microsoft (NASDAQ:MSFT) led the selloff in big tech, down about 3%, while Google-parent Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB), and Amazon (NASDAQ:AMZN) were also in the red.
The US Producer Price Index surged 0.8% in November following a 0.6% increase in October, above the 0.5% gain expected in a Bloomberg survey. Year-over-year, producer prices jumped 9.6% in November, the largest rise on record.
The Federal Open Market Committee gets its two-day meeting underway, and is expected to announce Wednesday a plan to double its pace of bond purchases tapering to $30 billion per month to provide it with room to hike rates earlier to curb the threat of inflation.
"The pressure is on the Fed to act but after waiting on the sidelines for so long and falling behind the curve, the aggressive action arguably needed to stem the backup in costs will likely come with a significant consequence for growth," Stifel said in a note.
Against the backdrop of elevated inflation and bets on less accommodative policy from the Fed, Treasury yields climbed, paring some of their losses from a day earlier.
Financials bucked the trend lower, underpinned by a rise in Lincoln National (NYSE:LNC), The Travelers (NYSE:TRV), and Prudential Financial (NYSE:PRU) as insurers tend to benefit from a rising environment.
Energy was also in the green even as oil prices fell amid concerns that the impact of the Omicron variant of Covid-19 on travel will dent energy demand.
Tesla (NASDAQ:TSLA) fell more than 3% adding to its recent losses after chief executive Elon Musk sold another $906 million of his shares on Monday, taking his total sales to 11.9 million.
In other news, meme stocks including GameStop Corp (NYSE:GME) and AMC Entertainment (NYSE:AMC) continued to give up gains as investor sentiment on risky assets soured.
Moody's: The Fed's December rate decision will strike a compromise between inflation risks and COVID uncertainty.
Bank of England: The FPC is vigilant about the financial stability risks that crypto-assets may pose.
BoE: We will raise the UK CCyB rate to 1% by December 13, 2022.
NY Fed Survey: Median uncertainty about future inflation outcomes grew over both the short and medium-term horizons, reaching new highs for the poll since its inception in 2013.
Saudi Energy Minister Abdulaziz: Reduced exploration and drilling investments could cut oil production by 30 mln barrels by 2030.
The Bank of Canada has renewed inflation objective of 2%, with a control zone of 1% to 3%.
The S&P 500 retreated Monday, led by a selloff in cyclical stocks including energy as fresh worries about the economic impact of the Omicron Covid-19 variant soured investor sentiment on Wall Street.
The S&P 500 fell 0.6%, the Dow Jones Industrial Average slumped 0.61% , or 219 points, the Nasdaq slipped 0.9%.
Energy fell nearly 3% weighed down by falling oil prices amid fresh worries about the threat to energy demand from the growing emergence of the omicron variant, which has led to tougher restrictions in countries including the U.K.
Chevron (NYSE:CVX), Kinder Morgan (NYSE:KMI) and Exxon Mobil (NYSE:XOM) were the biggest declines in the energy sector.
The jitters over the energy demand outlook come even as the OPEC raised its world oil demand forecast for the first quarter of 2022, forecasting a mild and temporary impact from Omicron.
Consumer discretionary stocks were also hit by Omicron-fueled fears with cruise line companies including Carnival (NYSE:CCL) and Norwegian Cruise Line (NYSE:NCLH) leading to the downside.
In tech, Apple (NASDAQ:AAPL) gave up gains after failing just shy of recording a $3 trillion valuation.
Semiconductor stocks exacerbated the decline in tech, paced by a decline in Amkor Technology (NASDAQ:AMKR), NVIDIA (NASDAQ:NVDA) and Applied Materials (NASDAQ:AMAT).
The risk-off sentiment triggered a flight to safety, supported a move higher in U.S. government bond prices, which trade inversely to yields. The 10-year yield fell below 1.4%.
Against the backdrop of falling yields, banking stocks including Regions Financial (NYSE:RF) , Wells Fargo (NYSE:WFC) and People’s United Financial (NASDAQ:PBCT) fell sharply.
Lower interest rates dent the return on interest that banks earn from their loan products, or net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to depositors.
Utilities and consumer staples - defensive corners of the market - bucked the trend lower, while health care was also supported by a rise in the shares of vaccine makers.
Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), and Novavax (NASDAQ:NVAX) rising more than 1% following further reports confirming that additional booster Covid shots were effective against the Omicron variant.
The sell off on Wall Street comes just a day ahead of the Federal Reserve's two-day meeting, which is expected to culminate on Wednesday in an announcement of a faster pace of bond tapering.
"At its final meeting of the year, we expect the FOMC to deliver a material hawkish pivot that matches recent rhetoric from various FOMC participants, including Chair Powell," Morgan Stanley said in a note.
"We think the key policy decision at this meeting will be to accelerate the taper to a pace of $30bn/month, beginning in January, and setting the taper on course to conclude in mid-March," it added.