Shares were largely lower on Tuesday, as technology stocks continued to come under pressure as investors continued to ponder the market implications of the Federal Reserve’s renomination Jerome Powell to lead the central bank.
The S&P 500 fell. The day before, the blue chip index had hit an all-day high before pulling back to finish in the red, with technology stocks falling. The Nasdaq was on course for another drop of more than 1%. The Dow – which is heavily weighted in cyclical stocks – gained more than 100 points, or 0.3%, in afternoon trading as energy and financial stocks outperformed.
US West Texas intermediate crude oil futures (CL=F) recovered losses and were up 2% after falling more than 1% earlier in the morning. The move came after the White House announced it would release a total of 50 million barrels of oil from the Strategic Petroleum Reserve (SPR), along with similar moves from China, Japan, India and South Korea and the UK, to try and alleviate rising energy prices with extra supply.
Shares of Zoom Video Communication (ZM) fell even after the company posted better-than-expected quarterly revenue growth and full-year outlook, with use of the video conferencing company’s software slowing during the reopening. Companies such as Nordstrom (JWN), The Gap (GPS) and Autodesk (ADSK) will report quarterly results on Tuesday.
The reappointment of Fed Chair Jerome Powell to central bank leadership caught the attention of the market this week, with many investors reacting positively to the likelihood that the monetary policy framework previously telegraphed by the Fed would remain in effect with the reappointment of Fed Chair Jerome Powell. powell. That includes the expectation that current asset purchases will decline by mid-next year and that there will be at least one rate hike before the end of 2022.
“Continuity in a time of such extraordinary uncertainty is certainly welcome news. We have extraordinary uncertainty as we are turning from the phase of the cycle where the Fed had bolstered the recovery from the pandemic-induced recession, and… it prevented a financial market collapse,” Diane Swonk, Grant Thornton’s chief economist, told Yahoo Finance Live. “But now we have very easy financial market conditions and we are dealing with inflation. And turning to face inflation and tackle it without derailing the recovery – that’s very hard to do. We haven’t seen the Fed cut inflation since the early 1980s.”
President Joe Biden also nominated Fed Governor Lael Brainard — previously identified as a potential candidate for the position of Fed Chairman to replace Powell — as Vice Chairman of the Fed’s Board of Governors. With these two nominations, market participants have turned their attention to who could fill the three vacant and soon-to-be vacant seats on the Fed’s board of directors, including its chief vice chairman for oversight. Biden said in a press statement Monday morning that he expected to announce those appointments “in early December.”
“Political decisions like this are competitions between affinity – you love someone in your own party – and convenience – what can you get the Senate to do for you, and will the markets receive it? You have to think of the Powell-Brainard choices as part of a larger package,” Vincent Reinhart, Dreyfus-Mellon’s chief economist and macro strategist, told Yahoo Finance Live. “The White House is getting three new governors to nominate, and it’s likely to become more progressive. So the bottom line is that in six months the group of people who have to argue with President Powell to make decisions will be more modest than it is now.”
13:55 ET: Ark Innovation Fund on track for worst 5-day decline since March as tech crisis deepens
Cathie Wood’s Ark Innovation Fund (ARKK) hit its worst five-day performance in eight months as the heavily weighted growth stock fund was hit by this week’s loss of technology stocks.
The exchange-traded fund was down about 12.3% in the past five days via intraday trading on Tuesday. That’s because some of the fund’s largest holdings have seen significant declines over that period: Teledoc Health and Zoom Video Communications, which represent 5.97% and 4.95% weight in the ETF respectively, are each with more than 24%. Other holdings, including Roku, Square and Twilio, also fell double digits during that period.
One notable exception is Tesla, or the largest holding in the ETF. Shares of the electric vehicle manufacturer are up 2.4% in the past five days to Tuesday afternoon.
9:49 a.m. ET: U.S. services PMI dips to two-month low, while manufacturing PMI rises to two-month high: IHS Markit
The closely-watched indices that tracked economic activity in both the US services and manufacturing industries diverged in early November, with supply constraints and rising prices dampening growth, especially in the private services sectors.
IHS Markit’s preliminary purchasing managers index (PMI) in November fell unexpectedly from 58.7 in October to 57.0, its lowest level in two months. Consensus economists had expected the index to rise to 59.0, according to data from Bloomberg. Readings above the neutral level of 50.0 indicate expansion in an industry.
However, the company’s manufacturing PMI rose to a two-month high of 59.1, meeting expectations. The manufacturing PMI stood at 58.4 in October. Coupled with the decline in the services PMI, the composite PMI for November fell from 57.6 in October to 56.5, signaling slowing overall growth.
“The slowdown underscores how the economy is struggling to cope with ongoing supply constraints,” Chris Williamson, chief economist for IHS Markit, wrote in a press statement. While supplier delivery delays have eased to their lowest level in six months, lead time extensions remain far greater than anything seen before the pandemic, limiting production relative to demand and pushing prices again sharply.”
9:34 a.m. ET: S&P 500, Nasdaq Extend Declines as Tech Decline Continues
Shares opened mixed on Tuesday, with both the S&P 500 and Nasdaq falling as technology stocks contributed to Monday’s losses.
The Dow remained little changed, with financial and other cyclical stocks rising further after the renomination of Federal Reserve chairman Jerome Powell to maintain his role as central bank leader. Goldman Sachs, Chevron and JPMorgan Chase outperformed the 30-stock index, while Microsoft, Salesforce.com and Nike weighed down.
Government bond yields also rose at the long end of the curve. The benchmark 10-year yield rose by more than 2 basis points to just below 1.646%.
7:33 a.m. ET Tuesday: Stock futures mostly lower
This is where the markets traded Tuesday morning:
S&P 500 futures (ES = F): -1 point (-0.02%), to 4,678.75
Dow futures (YM=F): +21 points (+0.06%), up to 35,592.00
Nasdaq futures (NQ = F): -26.75 points (-0.16%) to 16,355.25
rough (CL=F): -$0.42 (-0.55%) to $76.33 per barrel
Gold (GC=F): -$9.30 (-0.51%) to $1,797.00 per ounce
10-year treasury (^TNX): +2.6 fps for 1.651% yield
6:06 PM ET Monday: Stock Futures Open Slightly High
Here’s where the markets traded Monday night:
S&P 500 futures (ES = F): +7.5 points (+0.16%), to 4,687.25
Dow futures (YM=F): +49 points (+0.14%), to 35,620.00
Nasdaq futures (NQ = F): +28.5 points (+0.17%) to 16,410.50
Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, US, Nov. 8, 2021. REUTERS/Brendan McDermid
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter