Wall Street has been closely watching rising inflation to gauge the impact on businesses and consumers, as well as on the Fed’s plan to trim its support for the economy and markets. The central bank is reducing bond purchases that helped keep interest rates low throughout the virus pandemic. Earlier this week, Fed chair Jerome Powell told Congress that the central bank stands ready to raise rates to fight inflation.
Big technology stocks, which have an outsized influence on the S&P 500 because of their high valuations, accounted for a big share of the decline Thursday. The sector has been slipping in January as investors shift money in anticipation of rising interest rates, which tend to make pricey tech stocks less attractive.
Chipmaker Nvidia fell 5.1 per cent and software maker Adobe fell 2.9 per cent.
“It is a little bit of a confusing narrative for the first two weeks of this year,” said Scott Ladner, chief investment officer at Horizon Investments. “The market is really coming to grips with selling really highly valued, profitless tech names and finding other places to put money.”
Many of the big tech companies with solid revenue and profits, such as Apple and Microsoft, will suffer less than their counterparts that have little revenue, but rosy projections, he said.
Even so, those big tech names also lost ground Thursday. Apple fell 1.9 per cent and Microsoft fell 4.2 per cent.
Health care stocks, communication services firms and a mix of companies that rely on direct consumer spending were among the decliners. Pfizer fell 2 per cent, Facebook parent Meta Platforms dropped 2 per cent and Amazon slid 2.4 per cent.
Industrial companies were among the few gainers. Delta Air Lines rose 2.1 per cent after reporting surprisingly good fourth-quarter financial results. Other airlines also got a boost. American Airlines rose 4.5 per cent and United Airlines rose 3.5 per cent.
Financial stocks were mixed ahead of quarterly report cards Friday from several major banks, including JPMorgan Chase and Citigroup.
Investors are also monitoring how the latest wave of COVID-19 cases affects the global economy. In Asia, the omicron variant has swept across Australia and is gaining ground in other countries despite high vaccination rates, mask requirements and strict border policies.
Japan reported more than 13,000 new infections on Wednesday, the highest level in four months. China, whose zero-COVID policies are being challenged by outbreaks just weeks ahead of the Beijing Winter Games, is testing and in some cases locking down entire cities.
Markets in Asia and Europe ended mixed.
AP
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