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.