Nasdaq and the S&P 500 were losing ground on Thursday as investors banked some profits after three straight days of gains and turned their focus toward upcoming inflation data and how it might influence the Federal Reserve's meeting next week.
With fears abating about the latest coronavirus variant Omicron, the Nasdaq had rallied 4.7% in the last three sessions while the S&P had advanced 3.6% and the Dow, which was still rising on Thursday, had gained 3.4%.
Nasdaq was leading percentage declines among the major averages, and investors appeared to be in a waiting game ahead of the consumer prices index data due Friday morning. A higher-than-expected reading would strengthen the case for policy tightening ahead of the U.S. central bank's meeting on Dec. 15."There seems to be some profit taking after the three days of gains.
"If it comes in hotter than expected it really shines the light and the focus on the Fed meeting. The pressure would build on the Fed for a faster tapering," he said. Fed Chair Powell signaled last week that the meeting would include a discussion about a faster tapering of bond-buying.If the inflation number implies a need to hike rates faster, this "would put pressure on technology and give a bid to cyclicals" he said.
"You'd want to buy the companies that could pass on these higher costs to consumers. That undermines the growth story. You want to own more cyclicals and value than growth," said Quinlan. A Reuters poll of economists predicted the Fed would raise rates by 25 basis points to 0.25-0.50% in the third quarter of next year. However, most saw the risk that a hike comes even sooner.
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