The S&P 500 dropped from a record, while the technology-heavy Nasdaq 100 underperformed major stock benchmarks. A gauge of megacap companies slumped, with electric-vehicle maker Tesla Inc. down about 5%. Apple Inc. whipsawed after the iPhone maker approached a $3 trillion market value.
Travel shares such as airlines, cruise operators and hotels sold off. Bonds and the dollar climbed. Bitcoin sank.
About 20 central banks are due to hold meetings this week, with the Federal Reserve seen winding down bond purchases and signaling an interest-rate liftoff in 2022 – heralding a historic pivot to counter the fastest inflation since the 1980s. The European Central Bank, the Bank of England and the Bank of Japan are also set to announce their monetary policy decisions.
- “The Fed’s pivot to a more aggressive tapering schedule poses a larger risk for asset prices than most investors believe. Good news, supply is improving, but will it arrive at the wrong time?”, wrote Morgan Stanley strategists including Mike Wilson.
- “As long as the Fed doesn’t provide a materially hawkish surprise this Wednesday (something that’s possible, but unlikely), stocks can rally into year-end on momentum, even if valuations are again stretched,” wrote Tom Essaye, a former Merrill Lynch trader who founded “The Sevens Report” newsletter.
- “We do not expect the Fed to slam on the brakes to choke off liquidity, but rather look for it to “pump the brakes” as lightly as it can as it takes the mechanisms of emergency stimulus off gradually,” wrote John Stoltzfus, chief investment strategist at Oppenheimer.
The ghost of the tech bubble could soon come back to haunt investors as hefty valuations may be threatened by the likely tightening of monetary policy. The S&P 500’s long-term price-to-earnings ratio — which compares the current price with the 10-year average real earnings per share — has reached 37, a level last seen in 2000.
“Valuations are extremely high on almost any metric,” Deutsche Bank AG strategists said in a note.
Inflation expectations among U.S. consumers rose to a new high of 6% for the coming year, according to the latest consumer survey of the Federal Reserve Bank of New York. The study showed that Americans foresee faster price increases for items like rent and food, which take up a big chunk of household spending and can’t easily be substituted.
- Losses for a basket of meme stocks are mounting, with traders shifting away from riskier assets. GameStop Corp. and AMC Entertainment Holdings Inc. have been the biggest drags on the group since mid-November.
- Pfizer Inc. agreed to buy Arena Pharmaceuticals Inc. in a deal valued at about $6.7 billion that brings potential therapies targeting immuno-inflammatory diseases.
- Bristol Myers Squibb Co. climbed as the drugmaker said it will raise its dividend and buy back up to $15 billion in shares.
- Harley-Davidson Inc. jumped after saying it would list its electric-motorcycle unit publicly through a merger with a blank-check company.
Here are some key events this week:
- Euro zone industrial production, Tuesday.
- U.S. PPI, Tuesday.
- China releases November industrial output, retail sales data, Wednesday.
- Fed rate decision, Wednesday.
- U.S. business inventories, retail sales, empire manufacturing, Wednesday.
- BOE rate decision, Thursday.
- ECB rate decision, Thursday.
- U.S. housing starts, initial jobless claims, industrial production, Thursday.
- BOJ monetary policy decision, Friday.
- S&P Dow Jones Indices quarterly rebalance effective after markets close, Friday.
- “Quadruple witching” day in the U.S. market, when options and futures on indexes and equities expire, Friday.
Some of the main moves in markets:
- The S&P 500 fell 0.6% as of 12:38 p.m. New York time
- The Nasdaq 100 fell 0.9%
- The Dow Jones Industrial Average fell 0.8%
- The MSCI World index fell 0.6%
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was little changed at $1.1302
- The British pound fell 0.4% to $1.3226
- The Japanese yen was little changed at 113.43 per dollar
- The yield on 10-year Treasuries declined six basis points to 1.42%
- Germany’s 10-year yield declined four basis points to -0.38%
- Britain’s 10-year yield declined four basis points to 0.70%
- West Texas Intermediate crude rose 0.2% to $71.83 a barrel
- Gold futures rose 0.2% to $1,788.60 an ounce
© 2021 Bloomberg L.P.