Nasdaq Drops Nearly 2% As Stocks Mix After Global Central Bank Decisions

What drives markets?

Central banks remained on Wall Street a day after the Federal Reserve took an aggressive stance in its forecasts for rate hikes in 2022 and 2023, while also more aggressively slowing down the pace of bond purchases.

The Bank of England took a surprising decision on Thursday, becoming the first major central bank to raise interest rates since the start of the pandemic, raising its benchmark from 0.10% to 0.25%. The UK government’s concerns over the economic impact of the ommicron variant of the coronavirus, as well as advances from central bank policymakers, had led traders to expect the BOE to refrain from raising interest rates in December. .

Meanwhile, the European Central Bank also said on Thursday that it would further slow down asset purchases under its Pandemic Emergency Purchase Program, or PEPP, in the first quarter of next year and stop in March. But the ECB softened the blow by planning to increase purchases in the second quarter as part of a separate, existing program, while ECB President Christine Lagarde reiterated that a rate hike in 2022 remained unlikely.

Read: ECB ends purchases of pandemic emergency assets in March as Bank of England delivers ‘Super Thursday’ surprise

US stocks started in gains, seeing the S&P 500 trade briefly above the December 10 record, but the tech-heavy Nasdaq and S&P 500 quickly moved lower.

“Rates retreated despite the Fed not only confirming the rapid QE winding down but also indicating the likelihood of three rate hikes in 2022 and three more in 2023, where they hope the fed funds rate will equalize inflation,” he said. Louis Navellier, founder of Navellier & Associates, in a note. “Then this morning the UK raised interest rates while the ECB confirmed it has no intention of raising interest rates in 2022. It’s a mixed bag of uncertainty over inflation versus monetary support from central banks.”

Mike Kramer of Mott Capital Management attributed the earlier rally to decreased volatility. “The rally in equities was driven purely by the lower price in the VIX VIX,
+9.80%,
as implied volatility declines. We see that a lot these days,” he says.

In addition to the news from the central bank, new claims for US unemployment benefits rose by 18,000 to 206,000 in mid-December, but the level remains relatively low after last week, when the number of claims fell to its lowest level since 1969.

In addition, the seasonally adjusted annual number of first-time homes rose to about 1.68 million in November, the highest level since March, according to data from the Census Bureau and the Department of Housing and Urban Development. Consensus estimates collected by FactSet had expected a percentage of 1.57 million.

The Fed said industrial production rose 0.5% in November. IHS Markit said the U.S. manufacturing purchasing managers’ index fell to 57.8 from 58.3 a month earlier, while the services PMI fell from 58 to 57.5. A reading of more than 50 indicates an increase in activity.

To see: US economy grows slightly slower in December, but still shows a lot of muscle

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Which companies were central?

• Lennar LEN reported a rise in earnings that beat analysts’ expectations late Wednesday, in news that could jeopardize a recent rally in homebuilders.

• Rubicon, a cloud-based operator of waste and recycling platforms, goes public by merging with special acquisitions company Founder SPAC FOUN, in a deal with an implied pro forma enterprise value of $1.7 billion.

• Delta Air Lines Inc. DAL shares fell 0.3% after it set its financial goals for the next several years ahead of its scheduled Capital Markets Day.

• Shares of Biogen Inc. BIIB took center stage after the company said it plans to submit a protocol for a Phase 4 confirmatory trial for its Alzheimer’s drug to US regulators in March.

• Original Parts Company GPC said Thursday that the Motion Industries Inc. unit will pay approximately $1.3 billion to Kaman Distribution Group, a 1,700-employee industrial distributor for power transmission, automation and fluid energy.

• Emerging BioSolutions Inc. EBS said Thursday it has started dosing participants in a phase 1 clinical trial for its universal flu vaccine candidate.

What about other assets?

• The 10-year Treasury yield TMUBMUSD10Y fell 3.5 basis points to 1.427%. Treasury yields and prices move in opposite directions.

• The ICE US Dollar Index DXY, a measure of the currency against half a dozen other monetary units, fell 0.5% following moves by the European Central Bank.

• In oil futures, West Texas Intermediate crude CL00, ahead of January CLF23 delivery, rose 2.2%.

• Gold futures GC00 for February delivery GCG22 were up 1.9%.

• The Stoxx Europe 600 Index SXXP ended 1.2%, while the London FTSE 100 Index UKX rose 1.3%.

• In Asia, the Shanghai Composite Index SHCOMP closed 0.8% higher, while the Hang Seng Index HSI gained 0.2% in Hong Kong. China’s CSI 300 000300 added 0.5%. Japan’s Nikkei 225 Index NIK rose 2.1%.

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