Wall St drops more than 1% on faster Powell comments, Omicron worries

A Wall Street sign is visible in front of the New York Stock Exchange (NYSE) in New York, New York, United States, July 19, 2021. REUTERS / Andrew Kelly

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  • Energy and bank stocks drive the market down
  • Fed’s Powell drops ‘transitory’ label for inflation
  • U.S. consumer confidence collapses in November
  • Falling indices: Dow 1.4%, S&P 1.4%, Nasdaq 1.5%

Nov. 30 (Reuters) – Major Wall Street indices fell more than 1% on Tuesday after Federal Reserve Chairman Jerome Powell said the risk of rising inflation increased and that it was appropriate to consider concluding the reduction in bond purchases a few months earlier.

In his testimony to the Senate Banking Committee, Powell said the time had come to withdraw the “transitional” description of inflation, adding that the US central bank should largely revisit the timing of the cut at its next meeting in two weeks. Read more

“Right now, we expected to hear from a more accommodating Federal Reserve, but we haven’t,” said Art Hogan, chief markets strategist at National Securities in New York.

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“We’re hearing a more hawkish Fed, but not so hawkish as people are betting they’ll hike rates earlier next year.”

Powell’s comments weighed on markets already concerned about the Omicron variant following a warning from Moderna’s chief executive about the effectiveness of COVID-19 fire against the variant.

Shares of the vaccine maker fell 7.6%, while Regeneron Pharmaceuticals Inc (REGN.O) fell 2% after saying its treatment with COVID-19 antibodies and other similar drugs may be less effective against Omicron. Read more

“We pretty much think it’s more contagious, what we don’t know yet is if it’s more deadly,” said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research.

“The most important thing is that the market doesn’t like uncertainty, and it creates a whole new level of uncertainty that we haven’t had yet.”

The declines were widespread, with all 11 major S&P sectors down. Communications services (.SPLRCL) fell 2.0%, followed by energy (.SPNY) and financials (.SPSY) stocks.

Banks (.SPXBK) fell 1.6%.

Travel and leisure stocks slumped, with the S&P 1500 Airlines (.SPCOMAIR) and S&P 1500 Hotels, Restaurants and Leisure (.SPCOMHRL) indices each slipping 2.7% and 2.1%, amid concerns over more border restrictions to curb the spread of the new variant.

The Russell 2000 Small Cap Index (.RUT) also fell 2.0%.

The uncertainty has raised new alarms as supply chain bottlenecks weigh on economic recovery and central banks around the world consider a return to pre-pandemic monetary policy to cope with an outbreak inflation.

Data showed that U.S. consumer confidence fell in November amid concerns about the rising cost of living and the relentless COVID-19 pandemic. Read more

As of 11:33 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 504.51 points, or 1.44%, to 34,631.43, the S&P 500 (.SPX) was down 64.65 points, or 1.39%, to 4,590.62, and the Nasdaq Composite (.IXIC) lost 231.66 points, or 1.47%, to 15,551.17.

The S&P 500 and Dow Jones were also forecast for a monthly decline, underperforming the Nasdaq, which follows a small gain for November.

Falling issues outnumbered advances for a 4.78-to-1 ratio on the NYSE and a 3.96-to-1 ratio on the Nasdaq.

The S&P Index recorded 6 new 52-week highs and 33 new lows, while the Nasdaq recorded 20 new highs and 414 new lows.

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Reporting by Devik Jain and Ambar Warrick in Bangalore; Editing by Shounak Dasgupta and Sriraj Kalluvila

Our Standards: Thomson Reuters Trust Principles.

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