Stock Market Closes Lower After Fed Official Says Inflation Could Last Into 2024


The stock market closed lower on Monday after Fed officials across the country delivered separate speeches saying inflation could persist into 2024 and that financial markets may be underestimating the number of rate hikes. Oil and real estate stocks took the brunt of the declines. Apple (AAPL) stock fell after a report that iPhone production could fall short of estimates.


The Nasdaq composite closed 1.6% lower and the S&P 500 fell 1.5%. The Dow Jones Industrial Average fell 1.5%. The small-cap Russell 2000 index sold 2%.

Volume rose on the NYSE and the Nasdaq from the same time on Friday, early data showed. But keep in mind that Friday was a half session.

The yield on the benchmark 10-year Treasury bill fell by one basis point to 3.68%. Crude oil rose 0.5% to $76.65 a barrel.

The largest decline among sectors occurred in real estate. The S&P Real Estate Select Sector ETF (XLRE) fell 2.8%.

Stocks close lower on Fed comments

New York Fed President John Williams said he expects inflationary pressures to ease over the coming year, but said he expects inflation to top 3% by the end of next year. He said the Federal Reserve will continue to pause its work as prices could slow to levels still above the Fed’s 2% target.

“There is still more work to be done,” Williams said in a speech to be delivered Monday.

St. Louis Fed Chairman James Bullard said in another speech Monday that the Fed is counting on an economic slowdown to help contain demand and inflation.

In a speech that echoed former Fed Chairman Alan Greenspan’s 1996 “irrational exuberance” speech, Bullard said financial markets are likely in denial about the number of rate hikes left in the current tightening cycle.

“The Fed is likely to raise rates by 0.50% at its December meeting and could further slow the pace of rate hikes if the economy starts to falter,” LPL Financial chief economist Jeffrey Roach said in response to the comments. from Bullard. “High inflation is still the biggest concern for the Fed.”

The probability that the Federal Reserve will raise interest rates by 0.5% or 50 basis points at its mid-December meeting has fallen to 67.5%. The probability of a 75 basis point increase has risen to 32.5%, according to the CME FedWatch tool.

According to retail analytics provider, Sensormatic Solutions, sales of bricks and mortar rose 2.9% during Black Friday. The National Retail Federation expects holiday sales to increase between 6% and 8% in 2022. Online shoppers didn’t wait for Cyber ​​Monday sales, boosting e-commerce revenue to $9.12 billion, up 2.3% from 2021.

Chinese stocks fell Monday, initially dragging the US market down after a weekend of protests erupted across China. Protesters challenged the Chinese government’s strict Covid-19 lockdowns. The Hong Kong Hang Seng index fell 1.6% and the Shanghai index fell 0.8%. But the iShares MSCI China ETF (MCHI) rose 1.1% and the iShares China Large-Cap ETF (FXI) gained 0.9%.

Apple falls on reports of low iPhone production

Production of the Apple iPhone Pro could fall by 6 million units due to civil unrest and Covid restrictions in China, according to reports. The stock closed 3.1% lower.

Bloomberg reported that unrest at the Foxconn factory in Zhengzhou could lead to a shortfall of 6 million units in iPhone Pro production by 2022. And that number could grow, according to sources, if Covid restrictions are extended for a few more weeks. The Zhengzhou factory produces the vast majority of iPhone 14 Pro and Pro Max smartphones.

AAPL shares fell below the 50-day moving average. Apple’s performance against the S&P 500 has been falling since September.

Dow Jones stock and aircraft maker Boeing (BA) fell 3.7% on Monday, diving below the 5% buy range. According to the IBD MarketSmith chart analysis, the stock crossed a buy point of 173.95 in a cup base for the first time after a breakout on Nov. 10. The buying area is 182.65.

Despite the unrest in China, pin duo (PDD) shares rose 12.7% after earnings on Monday, clearing a cup of base in heavy volume, according to MarketSmith’s pattern recognition. But the deep base, the extension of the PDD from the 50-day line and the overall China risk are of concern.

Pinduoduo Q3 revenue was up 256% year over year, easily beating views and well above Q2’s 157% growth. The e-commerce company’s revenue rose 65% to $4.99 billion, with growth accelerating for the third straight quarter.

Monday Stock Market: Construction supplier ignores real estate impediment

Real estate stocks fell across the board Builders FirstSource (BLDR) was an exception.

The supplier of building products and prefab home components rose 2.5% on Monday after it increased its share buyback program by $1 billion. The uptick authorizes $1.5 billion worth of stock repurchases. This represents 16.8% of the $8.91 billion market cap as of Friday’s close.

Real estate stocks are struggling with Tuesday’s Case-Shiller home price index, which economists say will show a 1.3% decline. Housing numbers have been weakening for months.

Axsome therapies (AXSM) rose 31.5% after Alzheimer’s treatment met goals of a phase 3 trial. The biotech is working on a treatment for Alzheimer’s patients who experience anxiety. In the final phase of the study, the drug AXS-05 outperformed a placebo, delaying or preventing relapse in patients with agitation. The stock was above the buy point of 66.25 of a heavy volume handle cup.

Among other popular biotech stocks, Catalyst Pharmaceuticals (CPRX) returned lower and the stock is back below a buy point of 16.76 from a cup-with-handle base that was cleared last week. This market leader was last Monday’s IBD Stock Of The Day and is also a member of the IBD Tech Leader and IBD 50 Growth Stock to Watch lists.

The Innovator IBD 50 ETF (FFTY) fell 2.5%, weighed down by oil and solar stocks such as PBF Energy (PBF), Shoals technology (SHLS), EOG Resources (EOG) and Civitas Resources (CIVI).

Follow Michael Molinski on Twitter @IMmolinski


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The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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