Tech stocks lift Nasdaq, banks weigh on S&P 500, Dow

The Nasdaq rose on Wednesday as investors moved into the perceived safety of technology stocks amid concerns about rising inflation, while a flattening Treasury yield curve hit banking stocks.

A Labor Department report showed consumer prices increased solidly in September, further strengthening the case for interest-rate hikes by the Federal Reserve. 

“If the recent pace of elevated inflation continues, that could push the Fed to start removing accommodation sooner rather than later, which could hurt stocks and other risk assets,” said Nancy Davis, founder of Quadratic Capital Management in Greenwich, Connecticut.

The Fed had last month said it would start cutting the pandemic-era stimulus in November, while the policymakers were about evenly divided on whether rate hikes will need to start next year or in 2023.

However, following the latest inflation data, futures on the federal funds rate, which track short-term interest rate expectations, priced in a quarter-point tightening by September next year. 

The focus will now be on the minutes of the central bank’s September policy meeting, due later in the day, for further signs that the days of crisis-era policy were numbered. 

Technology (.SPLRCT) and communication services (.SPLRCL) were among the few gainers among the 11 major S&P sectors, while energy (.SPNY) and financials (.SPSY) led declines.

Mega-caps growth names including Inc (AMZN.O), Google-parent Alphabet (GOOGL.O), Microsoft Corp (MSFT.O), and Tesla (TSLA.O) rose, while chipmakers (.SOX) added 0.8% after three days of losses.

However, banking shares (.SPXBK) were down 1.3%, tracking a fall in 10-year Treasury yield.

JPMorgan Chase & Co (JPM.N) fell 2.2% and weighed the most on the Dow and the S&P 500 despite its third-quarter earnings beating expectations, helped by the global dealmaking boom and release of more loan loss reserves.

Peers Bank of America (BAC.N), Citigroup (C.N), Wells Fargo (WFC.N), and Morgan Stanley (MS.N) will report results on Thursday, while Goldman Sachs (GS.N) will publish earnings on Friday.

BlackRock Inc (BLK.N) rose 3.7% after the world’s largest money manager beat quarterly profit estimates as an improving economy helped boost its assets under management, driving up fee income. read more

Analysts expect corporate America to report strong profit growth in the third quarter at a time when worries about supply chain problems and higher prices are affecting businesses emerging from the pandemic.

At 11:58 a.m. ET, the Dow Jones Industrial Average (.DJI) was down 114.23 points, or 0.33%, at 34,264.11, the S&P 500 (.SPX) was down 0.78 points, or 0.02%, at 4,349.87, and the Nasdaq Composite (.IXIC) was up 61.15 points, or 0.42%, at 14,527.07.

Among other stocks, Apple Inc (AAPL.O) fell 1.4% after a report said the iPhone maker was planning to cut production of its iPhone 13. read more

Delta Air Lines Inc (DAL.N) warned of a pre-tax loss for the fourth quarter due to a sharp rise in fuel prices, sending its shares down by 5.1%.

Chipmaker Qualcomm Inc (QCOM.O) gained 1.7% on a new $10 billion stock buyback plan.

Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the NYSE and by a 1.09-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and eight new lows, while the Nasdaq recorded 40 new highs and 37 new lows.

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