By Shreyashi Sanyal
(Reuters) -The Dow climbed on Thursday after the Federal Reserve’s announcement of a faster end to its pandemic-era stimulus pushed investors towards more economically sensitive sectors, while a fall in technology stocks hurt the Nasdaq and the S&P 500.
The U.S. central bank said on Wednesday it would end its bond purchases in March and signaled three quarter-percentage-point interest rate hikes by the end of 2022.
Fed Chair Jerome Powell said the U.S. economy no longer needed increasing amounts of policy support as annual inflation has been running at more than double the central bank’s target in recent months, while the economy nears full employment.
“Powell gave markets the Christmas present they were looking for,” said Paul Nolte, portfolio manager at Kingsview Asset Management, referring to the Fed’s plan to combat inflation as a welcome relief for markets.
Nine of the 11 major S&P 500 sector indexes were higher, with economy-focused financials, energy and materials leading gains, while the S&P 500 banks index added 2.5%.
Tech and consumer discretionary, the sectors housing most mega-cap growth stocks, declined.
The Nasdaq index was pressured by declines in shares of Apple Inc, Tesla Inc, Amazon.com Inc and Microsoft Corp fell between 2.0% and 4.4%.
“It’s a rotation toward more economically sensitive parts of the market … and we’re seeing interest rates pick up a little bit, that tends to work against technology stocks,” Nolte said.
Recent readings on surging producer and consumer prices as well as the fast-spreading Omicron variant of the coronavirus have fueled anxiety, but with most of the biggest market-moving events for the year now over, the benchmark S&P 500 closed in on record levels.
“I would say that a sprint to the finish likely is what this market should expect,” said Art Hogan, chief market strategist at National Securities in New York.
“There’s a real good chance that a lot of the things that have caused turbulence in both November and much of December are now in the rear view mirror, and markets might now be able to glide higher.”
At 12:02 p.m. ET the Dow Jones Industrial Average was up 136.14 points, or 0.38%, at 36,063.57, the S&P 500 was down 10.92 points, or 0.23%, at 4,698.93 and the Nasdaq Composite was down 237.60 points, or 1.53%, at 15,327.98.
The CBOE Volatility index, often considered Wall Street’s fear gauge, slipped to a three-week low.
Data showed the number of Americans filing new claims for unemployment benefits increased moderately last week, remaining at levels consistent with tightening labor market conditions.
Separately, a survey showed production at U.S. factories increased to its highest level in nearly three years in November.
Lennar Corp fell 2.7% after the homebuilder missed analysts’ estimates for quarterly profit as pandemic-led supply chain issues pushed lumber costs higher and delayed house deliveries.
Advancing issues outnumbered decliners by a 1.99-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.04-to-1 ratio on the Nasdaq. The S&P index recorded 66 new 52-week highs and one new low, while the Nasdaq recorded 38 new highs and 58 new lows.
(Reporting by Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)
