Posted on Monday, November 22, 2021 | 2:01 p.m.
Updated 25 minutes ago
A choppy trading day on Wall Street ended with mostly stocks falling on Monday, as a late-afternoon sales explosion derailed the market from another all-time high.
The S&P 500 fell 0.3% after rising as much as 1% earlier today and on the verge of eclipsing the record it set last Thursday. The Dow Jones Industrial Average posted a gain of 0.1%, while the Nasdaq lost an early gain and slipped 1.3% below the all-time high set on Friday.
Bond yields have risen sharply. Gold prices fell and energy futures mostly rose.
The market was higher for much of the day, with traders relieved to learn that President Joe Biden would appoint Jerome Powell to a second four-year term as head of the Federal Reserve, a vote of confidence in management by Powell of central bank policies during the brutal disruption caused by the coronavirus pandemic.
While stocks initially rallied at the news, bonds sold off, pushing yields higher. The 10-year Treasury yield fell from 1.54% Friday night to 1.63%.
Higher Treasury yields make the more expensive areas of the market, like technology stocks, less attractive, which may explain why there were more equity sales towards the end of the day as the bond market moved. .
“Growth sectors in (the stock market) don’t like higher bond yields,” said Willie Delwiche, investment strategist at All Star Charts. “Energy and finances, however, loved them. “
The S&P 500 lost 15.02 points to 4,682.94. The Dow Jones gained 17.27 points to 35,619.25. The highly technological Nasdaq gave up 202.68 points to 15,854.76.
Small business shares also fell. The Russell 2000 Index lost 11.81 points, or 0.5%, to 2,331.35.
US stocks have mostly risen since early October, with companies reporting much higher summer profits than analysts expected. The benchmark S&P 500 has posted a weekly gain in eight of the past nine weeks, hitting successive highs along the way.
Still, investors are looking for reassurance on how companies will fare in the coming months as they grapple with higher raw material costs and supply chain issues that could hurt future profits. . Consumers have so far absorbed the higher prices, but analysts fear they may eventually be able to curb spending if the higher prices persist for too long.
The Federal Reserve is starting to cut back on bond purchases that have helped keep interest rates low in an effort to support the economy and markets as rising inflation weighs on the economic recovery. Investors are watching the Fed closely to see if pressure from rising inflation is prompting it to step up plans to cut bond purchases and increase its benchmark interest rate.
“Powell gets the green light is a sign that Biden is staying the course on monetary policy and the Fed is gradually moving towards policy normalization,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Overall, the Fed will continue to be a force for monetary stability.”
More than 55% of S&P 500 stocks rose on Monday, but losses at large technology and communications companies outpaced gains elsewhere in the benchmark. Chipmaker Nvidia slipped 3.1% and Netflix fell 2.9%.
Rising bond yields have helped boost banks, which rely on higher yields to charge more lucrative interest on loans. Bank of America rose 1.9%.
Energy companies were among the winners, getting a boost as US crude oil prices rose 0.9%. Chevron closed up 1.8%. Companies that manufacture household and personal care products have made strong gains. Walmart rose 1.7% and supermarket operator Kroger rose 4.8%.
Companies that rely on consumer spending also weighed on the market, led by a pullback in shares of Target, which fell 2.5%, and Amazon, which fell 2.8%. These retailers are on the cusp of the peak holiday shopping season, which traditionally begins just after the Thanksgiving holiday.
The dollar also strengthened against other currencies. The price of gold, a haven for anxious investors, fell 2.4%.
Markets in Europe and Asia have closed in a mixed fashion, as a resurgence of coronavirus outbreaks has prompted some countries to turn to more stringent precautions to curb a new wave of the pandemic.
Investors face a relatively light schedule of economic updates during this shortened holiday week. The National Association of Realtors reported surprisingly good sales for previously occupied homes in October on Monday. The Commerce Department will release new home sales data for October on Wednesday, along with third-quarter gross domestic product data.
Markets in the United States will be closed Thursday for the Thanksgiving holiday. They will also close early Friday.