Written by Devik Jain, Shreyachi Sanyal and Sinad Karo
(Reuters) – The Nasdaq and S&P 500 were losing steam on Thursday as investors collected some profits after three straight days of gains and shifted their focus toward upcoming inflation data and how it could affect next week’s Federal Reserve meeting.
As concerns eased about the latest variant of the coronavirus Omicron, the Nasdaq rose 4.7% in the past three sessions while the S&P advanced 3.6%, and the Dow, which was still rising on Thursday, was up 3.4%.
The Nasdaq has been leading percentage declines among the major averages, and investors seem to be in a waiting game ahead of the CPI data due for release on Friday morning. A higher than expected reading will strengthen the case for tightening policy ahead of the US Federal Reserve’s December 15th meeting.
“It looks like there is some profit taking after three days of gains. There may also be a bit of risk ahead of Friday’s CPI number,” said Joe Quinlan, chief market strategist for the CIO desk at Bank of America, noting that there may be Investors close short positions or pause buying before the data.
“If it’s hotter than expected, it really does highlight and focus on the Fed meeting. And the pressure will build on the Fed to downsize faster,” he said. Fed Chairman Powell indicated last week that the meeting would include a discussion on reducing bond purchases faster.
“It will confirm in the minds of many people that the Fed is behind the curve,” Quinlan said.
He said if the inflation number indicated a need to raise interest rates faster, this “would put pressure on technology and give a cyclical view.”
“You might want to buy companies that can pass these higher costs on to consumers,” Quinlan said. “And that undermines the growth story. You want to have more cyclicality and more value from growth.”
A Reuters poll of economists expected the Fed to raise interest rates by 25 basis points to 0.25-0.50% in the third quarter of next year. However, most saw the risk of a price increase sooner.
By 2:59 PM ET, the index rose 26 points, or 0.07%, to 35,780.75, and the S&P 500 lost 22.4 points, or 0.48%, to 4,678.81 and fell 216.11 points, or 1.37%, to 15,570.88.
Eight of the S&P’s 11 major sectors declined, with consumers, real estate and energy vying for the biggest loser position in percentage terms.
Markets have swung since late November when the Omicron variant was discovered, and investors were worried that it could upend the global recovery at a time of rising inflation with Fed comments exacerbating volatility.
Wall Street’s major indices were supported this week by an update showing Pfizer (NYSE 🙂 And the BioNTech vaccine offered some protection against the Omicron variant.
1.2% is trading below an all-time high and has recovered nearly all of its losses after dropping as much as 5.24% since a record high on November 22nd.
Data showed that initial claims for state unemployment benefits fell by 43,000 last week to 184,000, the lowest level in more than 52 years.
CVS Health Corp (NYSE) rose 4.9%, boosting the healthcare sector of the S&P 500 Index, after the drugmaker raised its earnings forecast for 2021.
Apple (NASDAQ:) shares were roughly $7 shy of the $182.85 price needed to reach the $3 trillion market valuation. However, the iPhone maker’s stock was making slight progress on Thursday, last rising 0.3% below $176.
Jim Stop Corp (NYSE:) down 10% after the video game retailer said a subpoena was issued by the US securities regulator back in August to obtain documents regarding an investigation into its stock trading activity.
Low issues outnumbered advanced issues on the New York Stock Exchange by 2.62 to 1; On the Nasdaq, the ratio was 2.76 to 1 in favor of declining stocks.
The S&P 500 hit 22 new 52-week highs and one new low; The Nasdaq recorded 32 new highs and 52 new lows.