Stocks Fall on Drag From Powell Comments, Tech Woe: Markets Wrap

(Bloomberg) -- U.S. equities fell on Friday after the chairman of the Federal Reserve signaled some concern about inflation. 

The S&P 500 slid 0.1% and the Nasdaq 100 retreated 0.9% as Jerome Powell said the central bank was monitoring price pressures carefully and would adapt accordingly. 

Global supply-chain constraints and shortages that have led to elevated inflation “are likely to last longer than previously expected, likely well into next year,” Powell said, while adding that “it is still the most likely case” that as those constraints ease.

Investors are increasingly concerned higher cost pressures and global supply-chain bottlenecks will push the Fed to raise interest rates faster than expected. However, a solid start to the earnings season had offset those fears with the benchmark S&P 500 topping a record on Thursday.

“The market is getting more worried that we are in some kind of a longer term inflation rise,” said Jim Bianco, president and founder of Bianco Research, on Bloomberg TV and Radio’s “Surveillance.” Stocks won’t like if the Fed responds to inflation and bonds won’t like it if they don’t, he said. “That’s not a good scenario.”

The 10-year U.S. Treasury yield fell to 1.64% but still remained higher for the week. The dollar edged lower, on track for a second week of declines. And gold gained.

The losses came after the S&P 500 struggled for a direction earlier in the session after disappointing tech earnings overnight. A warning on ad spending from Snap Inc. wiped out more than $100 billion of market value from the social media company and its peers including Facebook Inc., Google-owner Alphabet Inc., Pinterest Inc. and Twitter Inc. Meanwhile, Intel Corp. also fell on lower-than-expected sales amid component shortages.

“A double whammy of bad news for the tech sector could well mean that record highs are out of reach for now,” Fiona Cincotta, senior financial markets analyst at City Index, wrote in a note. 

Despite the threat of price pressures, however, global stocks are set for a third weekly advance helped by the ongoing recovery from the health crisis. Stocks in Europe gained on Friday, led by consumer shares on positive earnings. Equities in Asia also rose after China Evergrande Group pulled back from the brink of a default, easing concerns about a contagion from the property developer’s woes. 

Crude oil gained, Bitcoin fell to $60,900, and Russia’s ruble surged after the country’s central bank raised borrowing costs by more than economists’ expectations.

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

• The S&P 500 fell 0.1% as of 4 p.m. New York time
• The Nasdaq 100 fell 0.9%
• The Dow Jones Industrial Average rose 0.2%
• The MSCI World index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro rose 0.2% to $1.1644
• The British pound fell 0.2% to $1.3762
• The Japanese yen rose 0.5% to 113.43 per dollar

Bonds

• The yield on 10-year Treasuries declined six basis points to 1.64%
• Germany’s 10-year yield was little changed at -0.11%
• Britain’s 10-year yield declined six basis points to 1.15%

Commodities

• West Texas Intermediate crude rose 1.9% to $84.07 a barrel
• Gold futures rose 0.7% to $1,795.10 an ounce

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