(Bloomberg) — A final-hour selloff in tech shares sent U.S. stocks to a second straight loss, while Treasuries retreated following President Joe Biden’s nomination of Jerome Powell to head the Federal Reserve for a second term. The dollar climbed.
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The S&P 500 turned lower in the final hour of trading, while the Nasdaq 100 dropped more than 1%. The broader index had spent all of the session higher before a sell-off in tech shares popular among hedge funds dragged it lower for the day. Peloton Interactive Inc. and Docusign Inc. slid at least 5.5%. Farfetch Ltd. and Snowflake Inc. drove a basket of software and internet companies that have yet to earn any money down more than 5%.
“I don’t know why the tape collapsed late but the market has rallied so much, so quickly, a retracement has to happen at some point. This could be the start,” said Mike Zigmont, head of trading and research at Harvest Volatility Management.
The Powell nomination had dominated market sentiment for much of the day before the big about-face in equities. The yield on two-year bonds jumped toward 0.6%. The U.S. swaps market is now pricing a full 25 basis point rate hike into the June Fed meeting, with a second increase seen for next November. The dollar climbed, while gold slumped more than 2% and oil gained.
Biden had been considering between Powell and Lael Brainard, who he nominated to move up to Vice Chair. The Powell choice comes amid growing concern the U.S. central bank may fall behind the curve in combating sticky inflation. Consumer-price growth is surging at the fastest pace in decades and expectations for price growth are at the highest since 2013.
“The whole point is it doesn’t change anything — the same issues are on his plate now, which is are they going to be right that the pop in inflation is going to be transitory and if not, what do they do about it?” David Donabedian, chief investment officer of CIBC Private Wealth Management, said by phone. “The choice about Powell’s renomination is all about continuity.”
Read: Fed Bets Could Move Even More If Decision Lets Powell Cut Loose
Shares got a lift overnight from a flurry of potential deals. Vonage Holdings Corp. jumped more than 20% as Ericsson agreed to buy it. Telecom Italia SpA surged 30% in Europe after KKR & Co. bid for it.
“We’re kicking off a busier-than-you-may-think Thanksgiving week in rebound mode,” said Chris Larkin, managing director of trading at E*Trade Financial. “And while the short trading week historically is considered sleepier than others, keep in mind that over the past 15 years the U.S. stock market has tended to gain more ground the month after Thanksgiving than the month before it. So coupled with a busy economic calendar and more retail earnings, traders may have good reason to stay tuned in to the market this week.”
U.S. stocks are trading near record levels, outpacing the rest of the world, as investors see few alternatives amid rising inflation and a persistent pandemic that undermines global recovery. Concerns about high valuations and the potential for the economy to run too hot on the back of loose monetary and fiscal policies have interrupted, but not stopped the rally.
Oil kept gains on speculation that OPEC and its allies may adjust plans to raise production if the U.S. releases crude reserves in coordination with other nations. Delegates said that even the modest output increase they have penciled in may now be re-evaluated when the group meets next week.
Read: U.S. Poised to Release Oil From Reserve Along With Other Nations
For more market analysis, read our MLIV blog.
Here are some key events this week:
Eurozone, U.S. PMI data Tuesday
Reserve Bank of New Zealand rate decision Wednesday
U.S. FOMC minutes, consumer income, wholesale inventories, new home sales, GDP, initial jobless claims, U.S. durable goods, University of Michigan consumer sentiment. All Wednesday
Bank of Korea policy decision Thursday
U.S. Thanksgiving Day: U.S. equity, bond markets closed Thursday
Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday
Some of the main moves in markets:
The S&P 500 fell 0.3% as of 4:03 p.m. New York time
The Nasdaq 100 fell 1.2%
The Dow Jones Industrial Average was little changed
The MSCI World index fell 0.6%
The Bloomberg Dollar Spot Index rose 0.4%
The euro fell 0.5% to $1.1236
The British pound fell 0.5% to $1.3389
The Japanese yen fell 0.8% to 114.86 per dollar
The yield on 10-year Treasuries advanced seven basis points to 1.62%
Germany’s 10-year yield advanced four basis points to -0.30%
Britain’s 10-year yield advanced five basis points to 0.93%
West Texas Intermediate crude rose 0.5% to $76.31 a barrel
Gold futures fell 2.5% to $1,807.90 an ounce
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