Day Traders Diary

12/14/21

The major averages pulled back as new inflation data continued to show a sharp rise in prices. The S&P 500 declined 34 points or 0.75% while and Nasdaq Composite fell 175 points or 1.14%. The Dow Jones Industrial Average slid 106 points but outperformed the other major benchmarks.

Tech stocks were a main source of weakness on Tuesday, though the sector trimmed its losses in afternoon trading. Microsoft was a major drag on the market averages, falling more than 3%. Fellow software stock Adobe dropped 6.6%.

Elsewhere, automaker Ford slid 1.9% following news that by 2030 Toyota would be investing $35 billion into battery-powered electronic vehicles, a space where Ford has sought to establish itself as a leader. Tesla shares fell 0.8% after CEO Elon Musk announced that that he has sold another $906.5 million in shares.

The down day on Wall Street followed the November reading for the producer price index showing a year-over-year increase of 9.6%, the fastest pace on record and above the 9.2% expected by economists, according to Dow Jones. The index rose 0.8% month over month, above the 0.5% expected.

The hotter-than-expected inflation reading comes as the Federal Reserve also kicks off its two-day meeting on Tuesday. The central bank will release a statement on Wednesday with quarterly projections for the economy, inflation and interest rates. Chairman Jerome Powell will also hold a press conference.

Investors will be watching closely this week for commentary around if the Fed plans to accelerate the end of its bond-buying program. At present, the central bank's asset purchase program will end in June 2022, but several officials have spoken about ending the purchases sooner.

The latest CNBC Fed Survey showed that investment professionals and economists expect the Fed to wind down its asset purchases by March and begin rate hikes in June.

Wolfe Research strategist Chris Senyek said in a note to clients on Tuesday that the Fed will need to walk a fine line to avoid spooking the markets.

On the positive side for the market, major bank stocks rose along with interest rates, with Goldman Sachs and Bank of America each adding more than 1%. Regional banks and energy stocks also outperformed.

On the Covid front, Pfizer announced that its drug aimed at treating patients with the virus proved effective in a final analysis, including against the new omicron variant. However, the World Health Organized warned on Tuesday that the new variant appeared to be spreading faster than previous versions of the virus.

Tuesday's moves marked a second straight down day for Wall Street. However, the Dow and S&P 500 are still within roughly 3% of their intraday record highs. The Nasdaq is about 6% below its high-water mark.

All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.