Stocks Fall on Wall Street Tuesday
(AP) -- Stocks fell broadly on Wall Street Tuesday as new data showing that inflation is still running high put a spotlight on what action the Federal Reserve will take as it holds its last meeting of the year.
The S&P 500 index fell 0.7%, adding to its losses from a day earlier. Nearly 70% of the companies in the benchmark index fell, led by technology stocks. Only financial sector stocks eked out a gain.
The Dow Jones Industrial Average dropped 0.3%, while the tech-heavy Nasdaq composite slid 1.1%. Smaller company stocks fell more than the broader market, closing 1% lower.
The selling came as investors received another update on persistently rising inflation. The Labor Department reported that prices at the wholesale level surged by a record 9.6% in November from a year earlier. The department's producer price index measures inflation before it reaches consumers.
Businesses have been dealing with supply chain problems and higher costs for months. It has been a key concern for investors as big companies pass those costs off to consumers, who have so far been absorbing higher prices on everything from groceries to clothing and other consumer products. On Friday, the Labor Department reported that consumer prices surged 6.8% for the 12 months ending in November, the biggest increase in 39 years.
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The discouraging reports on inflation precede the last two-day meeting of the Federal Reserve this year, which started Tuesday.
"What does the Fed do with this data?" said Tom Hainlin, national investment strategist at U.S. Bank Wealth Management. "That's what investors are positioning around today."
The S&P 500 fell 34.88 points to 4,634.09. The index set an all-time high on Friday, when it closed out its biggest weekly gain since February. The index is up 23.4% so far this year.
The Dow dropped 106.77 points to 35,544.18. The Nasdaq fell 175.64 points to 15,237.64. The Russell 2000 gave up 20.85 points to 2,159.65.
The Federal Reserve is expected to speed up the withdrawal of economic stimulus measures in the face of rising inflation. Specifically, it plans to speed up the process for trimming bond purchases, which have helped keep interest rates low and support the stock market and broader economy. Beyond that, investors are watching the central bank for any statements on how soon it might raise interest rates in 2022.
Rising inflation and the Fed's plan to ease off its economic support are key reasons for much of the choppiness in the broader markets, said Jay Hatfield, CEO of Infrastructure Capital Advisors.
"The reality of less liquidity next year is sinking in and that's causing massive selling in mostly overvalued momentum stocks," he said.
Technology stocks led the market's pullback Tuesday. Microsoft fell 3.3% and Adobe slid 6.6% for the biggest decline in the S&P 500.
"Anytime there's the thought that the Fed may raise interest rates more than what's priced into the market those sectors become weak in the near term," Hainlin said.
A mix of retailers and several big communications companies also fell. Lowe's Cos. fell 1.9% and Google parent Alphabet fell 1.3%.
Bond yields edged higher. The yield on the 10-year Treasury rose to 1.44% from 1.42%. That helped banks make gains, as they rely on higher yields to charge more lucrative interest on loans. JPMorgan Chase rose 0.8% and Bank of America rose 1.3%.
Energy sector stocks fell following a 0.8% drop in the price of U.S. crude oil. Hess fell 0.8%.
Wall Street is also closely monitoring any news on the newest coronavirus variant that is spreading rapidly in Britain and some other regions. It appears to cause less severe disease than previous versions of the coronavirus, according to an analysis of data from South Africa. Pfizer's vaccine seems to offer less defense against infection from it but still offers good protection from hospitalization.