S&P 500, Nasdaq slide on hot producer price data as Fed meat looms

The fast-spreading Omicron coronavirus variant also dampened the mood after the S&P 500 index hit an all-time high late last week.

Megacap technology and communications stocks led the decline, with Meta Platforms, Microsoft Corp., Tesla Inc., Alphabet Inc. and Amazon.com Inc. falling between 0.8% and 3%.

“People are trying to create an environment … to slow the spread or severity (of Omicron), but also people who are well and want to participate in the economy. So there’s a push more at play here. There is a bridge,” said Tom Martin, Globalt’s senior portfolio manager.

“Investors want to be neutral until the end of the year. They don’t want to trade too much between now and then, unless nothing is upsetting.”

Apple Inc grew 0.7%, bucking the trend among its heavyweight peers, as it was on its way to becoming the world’s first $3 trillion company in market value.

Labor Department data shows the producer price index (PPI) for final demand rose 9.6% in the 12 months through November, its biggest gain since November 2010, and an 8.8% increase in October.

Investors were expecting a sharper tone from the Fed at the end of its two-day meeting on Wednesday, with financials up 0.7% in seven of the 11 major S&P 500 sector indexes.

The US central bank will likely signal a sharp decline in asset purchases, and thus, a rapid rise in interest rates to prevent a rapid rise in prices.

A Reuters poll of economists said the central bank raised interest rates to minus 0.25-0.50% in the third quarter of next year, followed by a hike in the fourth quarter.

“The central bank is set to announce an uptrend from January 2022, with consensus expected to double the pace to counter inflation,” Lukman Otunuga, Senior Research Analyst at FXTM, wrote in a client note.

“Traders are currently pricing in a 73% chance of at least one rate hike by early May 2022 and a 25-basis point increase fully by mid-June 2022.”

At 9:48 a.m. ET the Dow Jones Industrial Average was up 28.96 points, or 0.08%, at 35,679.91, the S&P 500 was down 19.90 points, or 0.43%, at 4,649.07, and the Nasdaq Composite was down 149.93 points, or 0.97%. at 15,263.35.

The blue-chip Dow index rose on gains in Goldman Sachs and UnitedHealth Group.

Beyond Meat gained 6.7% after Piper Sandler upgraded the plant-based meat maker’s stock from “low weight” to “neutral.”

There has been an increase in the number of issues declining to a 1.35-to-1 ratio on the NYSE and to a 1.99-to-1 ratio on the Nasdaq.

The S&P index recorded 10 new 52-week highs and two new lows, while the Nasdaq recorded 11 new highs and 179 new lows.