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End of Day Brief - Tuesday Nov 30 - Markets down on Powell's comments

Dow34483.72-652.22(-1.86%)
Nasdaq15537.71-245.14(-1.55%)
SP 5004567.00-88.27(-1.90%)
10-yr Note +28/321.432
NYSEAdv 687 Dec 2646 Vol 2.1 bln
NasdaqAdv 1404 Dec 2974 Vol 6.6 bln


Industry Watch

Strong: Information Technology
Weak: Communication Services, Utilities, Financials


Moving the Market

-- Market closes sharply lower on comments from Fed Chair Powell and Moderna (MRNA)

-- Fed Chair Powell says it's a good time to retire the word "transitory" and suggests its appropriate to taper more quickly

-- Moderna expects current vaccines to be materially less effective against the Omicron variant


Rough day for stocks after comments from Powell

Dow -652.22 at 34483.72, Nasdaq -245.14 at 15537.71, S&P -88.27 at 4567.00

[BRIEFING.COM] The stock market fell sharply on Tuesday, as risk sentiment was first pressured by the Omicron variant and then by commentary from Fed Chair Powell about inflation and monetary policy. The S&P 500 (-1.9%), Dow Jones Industrial Average (-1.9%), and Russell 2000 (-1.9%) each declined 1.9% while the Nasdaq Composite lost 1.6%.

All 11 S&P 500 sectors closed lower with losses ranging from 1.0% (information technology) to 3.0% (communication services). The relative outperformance of the tech sector was due to a 3% gain in Apple ($AAPL 165.30, +5.06, +3.2%) amid some defensive positioning, which was further evident in a nine-basis-point decline in the 10-yr yield (1.44%).

The session started modestly lower reportedly after Moderna's ($MRNA 352.43, -16.08, -4.4%) CEO told the Financial Times that he expects current vaccines to be materially less effective against the Omicron variant. Notwithstanding similar comments he made to CNBC yesterday, and reports suggesting that vaccines are likely to protect against severe disease, the uncertainty upset the market.

The real weakness, however, came after Fed Chair Powell said it's time to retire the word "transitory" when describing inflation and that it's appropriate to discuss at the next policy meeting about wrapping up the taper more quickly. Mr. Powell testified on the Coronavirus and CARES Act before the Senate Banking Committee.

Investors were caught off guard because there was a thought that the Omicron variant would presumably encourage the Fed to be more patient with tapering. Instead, the Fed chair suggested he was more concerned about tailoring policy to keep inflation pressures in check.

Of course, a speedier taper plan means the Fed could hike rates sooner than previously expected. The CME FedWatch Tool increased the probabilities for a rate hike in May 2022 (44.4%) and June 2022 (69.2%) to levels seen last week.

The fed-funds-sensitive 2-yr yield went from 0.43% to 0.56% during Fed Chair Powell's Q&A session. It eventually settled unchanged at 0.52%. The U.S. Dollar Index fell 0.5% to 95.85. WTI crude futures dropped 5.3%, or $3.70, to $66.14/BBL. The CBOE Volatility Index (27.19, +4.23, +18.4%) jumped above 27.00.


Reviewing Tuesday's economic data:

  • The Conference Board's Consumer Confidence Index dropped to 109.5 in November (Briefing.com consensus 111.0) from a downwardly revised 111.6 (from 113.8) in October. That is the lowest reading since February 2021.
    • The key takeaway from the report is that concerns about rising prices and the Delta variant were the drivers of the decline in confidence. With the omicron variant now on the scene and not part of the equation for the November report, one has reason to think that consumer confidence will continue to skew to the cautious side of things.
  • The Chicago PMI dropped to 61.8 in November (Briefing.com consensus 67.0) from 68.4 in October.
  • The FHFA Housing Price Index increased 0.9% m/m in September following an unrevised 1.0% increase in August. The S&P Case-Shiller Home Price Index increased 19.1% yr/yr in September (Briefing.com consensus 19.3%) following a revised 19.6% (from 19.7%) increase in August.

Looking ahead to Wednesday, investors will receive the ISM Manufacturing Index for November, Construction Spending for October, the ADP Employment Change report for November, the Fed's Beige Book for December, the weekly MBA Mortgage Applications Index, and the final IHS Markit Manufacturing PMI for November.

  • S&P 500 +21.6% YTD
  • Nasdaq Composite +20.6% YTD
  • Dow Jones Industrial Average +12.7% YTD
  • Russell 2000 +11.4% YTD

Source: (Briefing.com)

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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