On Tuesday, tech stocks got hit after another severe inflation number, which practically guarantees that the Fed is going to stop supporting markets soon.
The tech-heavy Nasdaq Composite fell 1.2%. The S&P 500 dropped 0.9%, and the Dow Jones Industrial Average managed the best, down 108 points, equal to 0.4%. West Texas Intermediate dropped 1.3% to below $72 a barrel.
Tech stocks appear to be in more serious trouble. In fact this week, the Nasdaq is down 2.6% and almost 6% from its all-time high.
If the Fed puts less into markets, there will be less capital available for investors to bet on companies. Plus there are innovations that can not generate earnings for years.
If investors needed to see signs that inflation was starting to cool, there it is. U.S. producer prices increased 0.9% in November from the previous month, exceeding forecasts for 0.6%, and up from 0.7%; core PPI climbed 0.9%, surpassing expectations for 0.5%. PPI increased by 9.7%.
The constant increases might encourage the Fed to remove the billions of dollars a month flowing into markets or move faster in a tapering.
Senior market strategist at New York Stock Exchange, Michael Reinking, wrote that investors have been waiting for the Fed to declare that it will accelerate the speed of the taper. Today, investors expect the Fed to announce if it will speed up the timeline of its tapering. That move could also indicate that the central bank will raise interest rates a couple of times in the following year.
Chief economic strategist at Capitol Securities, Kent Engelke, wrote that Fed officials might signal a more rapid and more significant tightening of monetary policy over the next couple of years. The result might be to the extent that markets might not have previously anticipated.
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