Markets edged lower in early trading Tuesday following declines in yesterday’s session as investors tune in for on a prolific week in Washington that includes the Federal Reserve’s final policy-setting meeting of 2021, set to commence today, and the release of new prints on retail sales, housing starts and other economic data.
All three major U.S. indexes were down amid figures from the Department of Labor that showed wholesale prices soared by a record 9.6% in November from a year earlier, the fastest annual pace on record for the indicator.
Traders are awaiting a decision from the Fed on how quickly the central bank will tighten monetary policy amid a backdrop of fresh inflation numbers that reflected the fastest annual increase in nearly four decades. The Labor Department’s Consumer Price Index (CPI) soared 6.8% in November compared to last year, according to figures published last week.
The Federal Open Market Committee (FOMC) is scheduled to hold its two-day policy-setting meeting starting on Tuesday, followed by the release of the monetary policy statement and remarks from Federal Reserve Chair Jerome Powell Wednesday. An updated Summary of Economic Projections outlining individual members’ outlooks for economic conditions and interest rates is set to accompany the statement.
The Fed has been under pressure to control rising inflation levels, as investors watch for clues of a faster taper that could set the stage for earlier rate hikes.
“Because inflation expectations do appear to be adaptive, our view is that the longer inflation stays elevated, the greater the risk that consumers adjust their behaviors in a way that contributes to persistently elevated inflation” wrote PIMCO economist Tiffany Wilding in a recent note to clients.
“We believe the Fed will want to manage this risk by shortening the time over which it winds down its purchases of U.S. Treasuries and agency mortgage-backed securities (MBS), aiming to end the program in March 2022, while also signaling a June rate hike is likely,” said Wilding.
PIMCO managing director and portfolio manager Sonali Pier also separately told Yahoo Finance Live that the firm expects to see two hikes in 2022, three hikes in 2023, and potentially four in 2024, with the Fed trying to bring the policy rate to neutral.
“Amid proliferating signs of solid growth and a robust job market, various measures depict a deeply troubled economy,” wrote Oxford Economics senior economist Bob Schwartz in a new report. “Households are downbeat, according to sentiment surveys, and the so-called ‘misery index‘ that adds together inflation and unemployment hovers around recession levels.”
Markets await a trove of fresh economic data this week. November retail sales, out on Wednesday, are expected to rise by 0.8%, according to Bloomberg consensus estimates. And November housing starts are forecasted to see a month-over-month increase of 3.3%.
Meanwhile, Morgan Stanley projects the U.S. unemployment rate will drop to 3% in 2022.
“It’s stunning to see how much the rate has fallen in the last five months,” Morgan chief U.S. economist Michael Feroli told Yahoo Finance Live. “We expect that pace of decline to slow, but it doesn’t take much to get below 4%, even with a tick up in the labor participation rate which has been depressed over the last year and a half.”
12:05 p.m. ET: Microsoft posts biggest drop since 2020
Shares of Microsoft (MSFT) were down more than 4% in midday trading, contributing to the Dow’s losses as the broader markets edged lower.
The software giant posted its biggest drop since last October, according to Bloomberg data, adding to yesterday’s loss of nearly 1% at close.
Separately, J.P. Morgan released fresh research on Tuesday that said investors overlook Microsoft’s leading position in data management. Data platform solutions contributed to about 12% of Microsoft’s total revenue in 1H21, up from roughly 10% in 2017, according to the bank’s note, which also said much of the company’s growth is driven by cloud data platforms that grew from about 3% of total revenue to about 7% in the same time period. J.P. Morgan expects this to be a key source of upside heading into 2022.
Microsoft had a year of stunning numbers that made it Yahoo Finance’s company of the year. The tech heavy weight passed a $2 trillion market capitalization in June and reported a $176 billion surge in revenue — a nearly 20% year-over-year increase.
11:13 a.m. ET: Dow reverses comeback, shedding more than 100 points
Here were the main moves in markets as of 11:13 a.m. ET:
S&P 500 (^GSPC): -52.68 (-1.13%) to 4,616.29
Dow (^DJI): -121.43 (-0.34%) to 35,529.52
Nasdaq (^IXIC): -279.60 (-1.81%) to 15,133.68
Crude (CL=F): -$1.00 (-1.40%) to $70.29 a barrel
Gold (GC=F): -$12.10 (-0.68%) to $1,776.20 per ounce
10-year Treasury (^TNX): +2.6 bps to yield 1.4500%
11:01 a.m. ET: Meme-stock darling AMC extends decline
Shares of AMC Entertainment Holdings Inc. (AMC) were down 2.19%, trading at $22.73 a piece, though recouping some losses after falling as much as 11% at the open. The company was hit hard in Monday’s sell-off along with other retail favorites, including Bed Bath & Beyond Inc. (BBY) and Tesla (TSLA).
The losses come as investors expect a rollback of pandemic-era stimulus by the Federal Reserve, putting risky assets and tech companies under pressure.
Retail investors comprise 20%-30% of trading volume, according to research from J.P. Morgan—a change from last year when these traders were seen as small-time market players.
10:17 a.m. ET: Dow turns green following tumble
Here were the main moves in markets as of 10:17 a.m. ET:
S&P 500 (^GSPC): -32.00 (-0.69%) to 4,636.97
Dow (^DJI): +16.28 (+0.05%) to 35,667.23
Nasdaq (^IXIC): -200.53 (-1.30%) to 15,212.75
Crude (CL=F): -$0.72 (-1.01%) to $70.57 a barrel
Gold (GC=F): -$13.10 (-0.73%) to $1,775.20 per ounce
10-year Treasury (^TNX): +3.9 bps to yield 1.4630%
9:30 a.m. ET: Markets open lower ahead of Fed decision
Here were the main moves in markets as of 9:30 a.m. ET:
S&P 500 (^GSPC): -36.88 (-0.79%) to 4,632.09
Dow (^DJI): -141.06 (-0.40%) to 35,509.89
Nasdaq (^IXIC): -217.32 (-1.39%) to 15,413.28
Crude (CL=F): -$0.92 (-1.29%) to $70.37 a barrel
Gold (GC=F): -$20.90 (-1.17%) to $1,767.40 per ounce
10-year Treasury (^TNX): +2.7 bps to yield 1.4510%
9:05 a.m. ET: Stock futures tick down
Here were the main moves in futures trading Tuesday morning:
S&P 500 futures (ES=F): -28.50 points (-0.64%), to 4,640.25
Dow futures (YM=F): -100 points (-0.28%), to 35,545
Nasdaq futures (NQ=F): -170 points (-1.06%) to 15,912
8:48 a.m. ET: Wholesale inflation surges 9.6%
Wholesale prices soared by a record 9.6% in November from a year earlier, the fastest annual pace on record for the indicator and a sign inflation pressures are likely to persist well into 2022.
The Labor Department reported Tuesday that its producer price index rose 0.8% in November after a 0.6% monthly gain in October. The figure, which measures inflation before it reaches consumers, marked the highest monthly reading in four months.
Food prices jumped 1.2% in November after falling 0.3% in October. Energy prices were up 2.6% after a 5.3% percent rise October.
7:07 a.m. ET: Stock futures mixed
Here were the main moves in markets in early trading Tuesday:
S&P 500 futures (ES=F): -8.25 points (-0.18%), to 4,660.5
Dow futures (YM=F): +22.00 points (0.06%), to 35,667
Nasdaq futures (NQ=F): -85.25 points (0.53%) to 15,996.75
6:00 p.m. Monday ET: Stock futures edge higher
Here were the main moves in markets in late trading on Monday:
S&P 500 futures (ES=F): +5.50 points (0.12%), to 4,674.25
Dow futures (YM=F): +46.00 points (0.13%), to 35,691
Nasdaq futures (NQ=F): +10.75 points (0.07%) to 16,092.75
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Read the latest financial and business news from Yahoo Finance