Stocks gained on Wednesday to recover some losses after a sell-off a day earlier, when more hawkish remarks from Federal Reserve Chair Jerome Powell compounded with lingering uncertainty around the Omicron variant and its impacts on the economy.
The S&P 500 rose to recoup declines after closing lower by nearly 2% Tuesday afternoon. The S&P 500 ended November with a monthly drop of 0.8%, with volatility over the past week wiping out prior gains following the discovery of the Omicron variant. Still, heading into the first session of December, the S&P 500 remained higher by nearly 22% for the year-to-date through Tuesday’s close.
The Dow underperformed during November, dropping 3.7%, while the Nasdaq eked out a monthly gain of 0.3%.
Some stocks, however, performed more strongly. Pfizer (PFE) shares closed out their best month since 1991 in November, jumping 23% as investors, faced with the new coronavirus variant, turned to vaccine-makers’ shares. Moderna (MRNA) shares rose 2% in November, though remarks from its CEO Stephane Bancel to the Financial Times saying that the company’s current COVID-19 vaccine would likely see a “material drop” in effectiveness against the Omicron variant sent the stock sharply lower during Tuesday’s session.
This commentary, as well as ongoing uncertainty over the transmissibility and severity of disease caused by the new variant, also contributed to the broader market drop on Tuesday.
“The market doesn’t like an information vacuum, and now we have two,” Thomas Hayes, Great Hill Capital Chairman, told Yahoo Finance Live. “Not only did we have the CEO of Moderna expressing concern that his vaccines may not have full coverage for Omicron, but then you had Powell throw this … wrench into the mix at the hearing saying that maybe we’ll speed up taper by a few months. That’s no small potatoes for sure, because the market had anticipated over six or seven months that we would get another $660 billion of liquidity.”
Namely, Powell told the Senate Banking Committee that it would be appropriate for the central bank to consider completing its asset-purchase tapering process “a few months sooner” than previously telegraphed. Market participants had been anticipating that the Fed might strike a more supportive stance for longer especially given concerns over the latest coronavirus variant. But instead, Powell suggested his priority was on curbing persistently elevated levels of inflation, and the Fed chair added it was “probably a good time to retire” his description of inflation as “transitory.”
“Chairman Powell’s commentary course-corrected the view on inflation and the potential need for quicker policy adjustment,” Charlie Ripley, senior investment strategist for Allianz Investment Management, wrote in an email. “The reality is hotter inflation coupled with a strong economic backdrop could end the Fed’s bond buying program as early as the first quarter of next year.”
“Ultimately, the transitory view on inflation has officially come to an end as Powell’s comments reinforced the notion that elevated prices are likely to persist well into next year,” he added. “With potential changes in policy on the horizon, market participants should expect additional market volatility in this uncharted territory.”
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10:05 a.m. ET: ISM Manufacturing index ticks up to 61.1 in November, coming in-line with estimates
Manufacturing sector activity picked up in November compared to October, though inflationary concerns and other price pressures continued to weigh on goods-producing industries.
The Institute for Supply Management’s (ISM) November manufacturing index came in at 61.1 for the month, up from 60.8 in October. Readings above the neutral level of 50.0 indicate expansion in a sector.
Beneath the headline index, a subindex tracking prices paid eased to 82.4 from 85.7 in October, but still came in elevated compared to pre-pandemic levels amid lingering inflation. A subindex tracking employment improved to 53.3, rising from October’s 52.0.
“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” Timothy Fiore, Chair of the Institute for Supply Management Manufacturing survey, said in a press statement. “All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products.”
“Pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential,” Fiore added.
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9:32 a.m. ET: Stocks rise, S&P 500 and Nasdaq gain more than 1%
Here’s where markets were trading just after the opening bell:
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S&P 500 (^GSPC): +48.17 (+1.05%) to 4,615.17
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Dow (^DJI): +254.43 (+0.74%) to 34,738.15
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Nasdaq (^IXIC): +177.88 (+1.13%) to 15,712.72
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Crude (CL=F): +$2.30 (+3.48%) to $68.48 a barrel
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Gold (GC=F): +$13.00 (+0.73%) to $1,789.50 per ounce
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10-year Treasury (^TNX): +3.7 bps to yield 1.478%
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8:22 a.m. ET: Private payrolls rose more than expected last month: ADP
Private sector employment expanded more than anticipated in November, suggesting further improvement in the labor market’s recovery.
U.S. private payrolls grew by 534,000 in November compared to October, ADP said in its closely watched monthly report. Consensus economists were looking for private payrolls to rise by 525,000, according to Bloomberg data. Private payrolls had grown by 570,000 in October, according to ADP’s revised monthly figure.
More data on the state of the labor market will be due on Friday, when the Labor Department releases its “official” government jobs report. Consensus economists are looking to see non-farm payrolls rose by 548,000 in November, accelerating modestly from October’s better-than-expected 531,000 rise. ADP’s report has not typically served as a perfect indicator of what to expect from the government job report due to differences in survey methodology.
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7:24 a.m. ET Wednesday: Stock futures hold onto gains, Dow futures gain nearly 300 points
Here’s where markets were trading as of 7:24 a.m. ET:
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S&P 500 futures (ES=F): +55.75 points (+1.22%), to 4,622.00
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Dow futures (YM=F): +293.00 points (+0.85%), to 34,750.00
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Nasdaq futures (NQ=F): +236.00 points (+1.46%) to 16,386.50
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Crude (CL=F): +$2.96 (+4.47%) to $69.14 a barrel
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Gold (GC=F): +$11.50 (+0.65%) to $1,788.00 per ounce
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10-year Treasury (^TNX): +4.4 bps to yield 1.485%
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6:15 p.m. ET Tuesday: Stock futures rebound
Here were the main moves in markets as the overnight session kicked off:
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S&P 500 futures (ES=F): +22.25 points (+0.49%), to 4,588.5
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Dow futures (YM=F): +92 points (+0.27%), to 34,549.00
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Nasdaq futures (NQ=F): +93 points (+0.58%) to 16,243.5
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter