Markets wrap: Megacap tech rallies as 10-year bond yield drops
Technology shares climbed amid lower Treasury yields after data showing inflation is running hot lifted companies seen as better equipped to pass on higher costs to consumers without harming their businesses.
Traders also assessed minutes of the Federal Reserve's latest policy meeting, with officials broadly agreeing they should start reducing stimulus in mid-November or mid-December amid increasing concern over inflation. Central bankers discussed an illustrative tapering path featuring "monthly reductions in the pace of asset purchases, by $10 billion in the case of Treasury securities and $5 billion in the case of agency mortgage-backed securities."
The tech-heavy Nasdaq 100 outperformed major equity benchmarks, while the NYSE FANG+ Index of giants such as Amazon.com Inc. and Google's parent Alphabet Inc. climbed about 1%. The S&P 500 rebounded, following a three-day drop. Ten-year yields remained below 1.6%. The two-year rate -- which is more sensitive to policy moves -- rose. Delta Air Lines Inc. led losses in U.S. carriers after warning that rising fuel costs will threaten earnings this quarter.
Prices paid by U.S. consumers rose in September by more than forecast, underscoring inflationary pressures. The Biden administration is trying to relieve supply-chain bottlenecks ahead of the Christmas shopping season, but officials acknowledge their options are limited. Unprecedented shipping challenges, materials shortages, high commodities prices and rising wages have driven up costs for producers. Many have passed a portion of those costs to customers, leading to more persistent inflation.
"Wednesday's still elevated consumer-price index marks about six-months worth of hot inflation data -- suggesting that inflation is not as transitory as many investors previously expected," said Nancy Davis, founder of the Greenwich, Connecticut-based firm Quadratic Capital Management. "The overall inflation story is being driven by supply-chain disruptions and a swift rise in prices, due to the labor shortage."
Some corporate highlights:
- JPMorgan Chase & Co.'s dealmakers posted their best quarter yet, riding what's on track to be a record year for mergers and acquisitions. Still, shares fell as consumer and commercial loan growth remained challenged.
- American Express Co. and other credit-card issuers tumbled as JPMorgan attributed weakness in its card business to rising costs on marketing and promotions, sparking concern over heightened competition.
Here are a few events to watch this week:
- Bank of America Corp., Morgan Stanley and Citigroup Inc. report earnings on Thursday
- U.S. initial jobless claims, PPI on Thursday
- Goldman Sachs Group Inc. reports earnings on Friday
- U.S. business inventories, University of Michigan consumer sentiment, retail sales on Friday
Some of the main moves in markets:
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- The S&P 500 rose 0.3% as of 4 p.m. New York time
- The Nasdaq 100 rose 0.8%
- The Dow Jones industrial average was little changed
- The MSCI World index rose 0.5%
- The Russell 2000 index rose 0.3%
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- The Bloomberg Dollar Spot Index fell 0.5%
- The euro rose 0.5% to $1.1593
- The British pound rose 0.5% to $1.3660
- The Japanese yen rose 0.3% to 113.29 per dollar
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- The yield on 10-year Treasuries declined four basis points to 1.54%
- Germany's 10-year yield declined four basis points to -0.13%
- Britain's 10-year yield declined six basis points to 1.09%
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- West Texas Intermediate crude fell 0.1% to $80.54 a barrel
- Gold futures rose 1.9% to $1,793.30 an ounce
