Stocks close lower after Fed officials say inflation could last into 2024

Stocks closed lower on Monday after Fed officials gave separate speeches across the country that said inflation could persist into 2024 and that financial markets could be underestimating the number of rate hikes. Oil and property shares took the brunt of the declines. apple ( AAPL ) stock lost ground after a report that iPhone production may fall short of estimates.

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The Nasdaq composite closed 1.6% lower and the S&P 500 fell 1.5%. The Dow Jones Industrial Average fell 1.5 percent. The small-cap Russell 2000 index sold off 2%.

Volume rose on the NYSE and Nasdaq vs. same time Friday, early data showed. But remember that Friday was half a session.

The interest rate on the benchmark index for 10-year government bonds fell one basis point to 3.68%. Crude oil rose 0.5% to $76.65 a barrel.

The biggest fall among sectors was in real estate. The S&P Real Estate Select Sector ETF (XLRE) fell 2.8 percent.

Stock market closes lower after Fed comments

New York Fed President John Williams said he expects inflationary pressures to ease over the next year, but said he expects inflation to be above 3% by the end of next year. He said the Federal Reserve will continue to have its work cut out as rates may decline to levels still above the Fed’s 2% target.

“There is still more work to be done,” Williams said in a speech to be delivered on Monday.

St. Louis Fed President James Bullard said in another speech Monday that the Fed is betting on an economic slowdown to help curb demand and inflation.

In a speech that echoed former Fed Chairman Alan Greenspan’s 1996 “irrational exuberance” speech, Bullard said financial markets are likely in denial about the number of rate hikes left in the current tightening cycle.

“The Fed is likely to raise rates by 0.50% at its December meeting and could further slow the pace of hikes if the economy begins to falter,” said Jeffrey Roach, chief economist for LPL Financial, in response to Bullard’s comments. “High inflation remains the biggest concern for the Fed.”

The probability that the Federal Reserve will raise interest rates by 0.5%, or 50 basis points, at its meeting in mid-December has fallen to 67.5%. The odds of a 75 basis point hike have risen to 32.5%, according to the CME FedWatch tool.

Black Friday brick-and-mortar sales rose 2.9%, according to retail analytics provider Sensormatic Solutions. The National Retail Federation expects holiday sales in 2022 to increase between 6% and 8%. Online shoppers didn’t wait for Cyber ​​Monday sales, lifting e-commerce receipts to $9.12 billion, up 2.3% compared to 2021.

Chinese stocks fell on Monday, first dragging the U.S. market lower after a weekend of protests erupted across China. Protesters challenged the Chinese government’s strict Covid-19 lockdowns. The Hong Kong Hang Seng Index fell 1.6% and the Shanghai Index fell 0.8%. But the iShares MSCI China ETF (MCHI) rose 1.1% and the iShares China Large-Cap ETF (FXI) rose 0.9%.

Apple falls on reports of low iPhone production

Apple iPhone Pro production could fall short by 6 million units due to civil unrest and Covid restrictions in China, according to reports. The share closed 3.1 percent lower.

Bloomberg reported that unrest at the Foxconn plant in Zhengzhou could trigger a 6 million-unit shortage in iPhone Pro production in 2022. And that number could grow if Covid restrictions are extended a few more weeks, according to sources. The Zhengzhou factory produces the vast majority of iPhone 14 Pro and Pro Max smartphones.

AAPL stock fell below its 50-day moving average. Apple’s performance compared to the S&P 500 has been declining since September.

Dow Jones Stock and Aircraft Manufacturer Boeing (BA) fell 3.7% Monday, dipping below its 5% buy range. The stock first crossed a 173.95 buy point in a cup base after a Nov. 10 breakout, according to IBD MarketSmith chart analysis. The buy range tops out at 182.65.

Despite Chinese unrest, Pinduo duo ( PDD ) shares rose 12.7% Monday after earnings, clearing a cup base in heavy volume, according to MarketSmith pattern recognition. But the deep base, PDD’s extension from the 50-day line and general China risk are concerns.

Pinduoduo Q3 revenue was up 256% year-over-year, easily beating views and well above Q2’s 157% growth. Revenue at the e-commerce company rose 65% to $4.99 billion, with growth accelerating for the third consecutive quarter.

Monday stock exchange: Building supplier ignores drag on property

Property shares fell across the board, however Builders FirstSource (BLDR) was an exception.

The supplier of building products and prefabricated home components rose 2.5% on Monday after increasing its share buyback program by $1 billion. The increase gives authorization to buy back shares worth 1.5 billion dollars. This represents 16.8% of the $8.91 billion market cap at Friday’s close.

Property stocks are struggling ahead of Tuesday’s Case-Shiller home price index, which economists expect will show a 1.3% drop. Housing data has weakened for several months.

Axsome Therapeutics (AXSM) rose 31.5% after the Alzheimer’s treatment met the goals of a Phase 3 study. The biotechnology is working on a treatment for Alzheimer’s patients who experience agitation. In the late-stage study, the drug, called AXS-05, outperformed a placebo, delaying or preventing relapse in patients with agitation. The stock gapped above the 66.25 buy point for a handle cup in heavy volume.

Among other hot biotechnology stocks, Catalyst Pharmaceuticals ( CPRX ) reversed lower and the stock is back below a 16.76 buy point from a cup-with-handles base that was removed last week. This market leader was last Monday’s IBD Stock Of The Day and is also a member of the IBD Tech Leader and IBD 50 Growth Stock to Watch lists.

The Innovator IBD 50 ETF (FFTY) fell 2.5%, weighed down by oil and solar stocks that PBF energy (PBF), Shoals Tech (SHLS), EOG Resources (EOG) and State resources (residents).

Follow Michael Molinski on Twitter @IMmolinski

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